An estimated 19 million taxpayers requested a filing extension this tax season, moving their deadline to October 15, 2024. That date, however, may have been pushed back if you live in one of the Federal Emergency Management Agency (FEMA) designated disaster areas. Thanks to Helene, Milton, and other weather events, many now have until May 1, 2025, to file. Unfortunately, if you do not qualify for FEMA relief, failing to submit your return by the extension deadline may have consequences. Here’s what you need to know.
File Sooner, Not Later
The IRS may not currently have you on their radar but don’t delay in filing your return. If you’re expecting a tax refund, you’ll need to submit your return within three years of the original (not extended) filing deadline. Failure to do so means you’ll forfeit your money. And if you owe the IRS, the longer you wait, the more trouble you’ll be facing – such as penalties, interest fees, and aggressive collection actions.
Penalties & Interest Will Keep Stacking Up
Speaking of those penalties and interest, they’ve been adding up since April 15, 2024. Your filing extension pushed back the due date for submitting your return. It did not give you extra time to pay any taxes due. The IRS assesses a failure-to-pay penalty for those who don’t submit their taxes on time. This penalty is equal to 0.5% of your outstanding tax balance. Now that you’re also late on submitting your return, a failure-to-file penalty (5%) can also be assessed. When both penalties are applied, the maximum penalty amount is 5% of your balance due.
Additionally, the IRS charges monthly interest for any unpaid balances. For 2024, that fee is equal to 8% of your outstanding balance. Combined with the penalty fees, it’s easy to see how your balance can quickly become unmanageable. There is one silver lining though; if you are due a refund, the IRS will not assess any penalties or interest fees.
The IRS Can File an SFR
Many taxpayers believe they can avoid paying taxes or being penalized by simply not filing their returns. As we mentioned earlier, the IRS may not come after you right away, but they’ll eventually catch up with you. If it’s been more than a year since your return was due, they can use a Substitute for Return (SFR) to determine if you owe any taxes. The bad thing about that is the IRS won’t include any deductions or credits you may be due. This will likely result in a tax balance and start the clock on your penalties and interest fees. It also kickstarts the collection process.
You Could Face Collection & Enforcement Actions
Once the IRS knows you haven’t filed or paid, they’ll start sending you notices. Ignoring them is not in your best interest. If it’s determined that you have an outstanding tax balance, collection actions will follow. This may include wage garnishment, levying your bank accounts, or placing liens on your property. In cases where the IRS believes you willfully evaded filing and paying your taxes, they can also pursue criminal charges.
Don’t Wait. Get Help Now!
If you missed the tax filing extension deadline and are worried that you owe taxes, now is the time to take action. It’s better to file now even if you can’t pay. This will help reduce the penalty fees and interest. You may also qualify for a payment plan or other tax relief.
You can download prior year tax forms and instructions from the IRS website or seek assistance from a tax professional. For a free tax consultation, contact Tax Defense Network at 855-476-6920 today!