Tax Day has come and gone this year, and that hopefully means you filed your federal returns or requested an extension before midnight on April 18th. If you missed the deadline and did not request an extension, the time to take action is now.
First, don’t panic. Missing the tax-filing deadline is not ideal, but you’re not alone. At least 5% of the population — about sixteen million people — fail to file each year. It’s not a good idea for them or you, but it does happen.
If you are in that situation, the sooner you address it, the better.
In this post, we’ll discuss the potential consequences you could face and the steps you can take to mitigate the damage.
First, the good news: You can still file. The sooner you do, the more you’ll save in penalties. Furthermore, if you missed the deadline but the IRS owes you a refund, there is no penalty — you have up to three years to claim your refund.
Now the bad news: If you owe the government money, there will be consequences. One of the most immediate, of course, is the potential for incurring penalties and interest. Exactly how much you are charged will vary depending on factors such as how late you are, how much you owe, the type of filing, and the jurisdiction, but they can add up quickly over time.
For example, if you miss the tax filing deadline and owe taxes, you can be charged a failure-to-file penalty of 5% per month, up to a maximum of 25% of the total tax owed. In addition, there is a failure-to-pay penalty of 0.5% of the unpaid tax per month, up to a maximum of 25%. Interest will also accrue on any unpaid taxes at a rate that the IRS sets.
Other types of filings may have different penalty structures, but they can also be significant. For example, a late annual report filing for a corporation in some states can result in fines of hundreds or even thousands of dollars.
Another potential consequence of missing a filing deadline is the loss of good standing or license. This can be true for businesses and individuals alike. For example, if a corporation fails to file its annual report on time, it may be deemed “not in good standing” by the state. This can have negative consequences, such as making it difficult to obtain financing or enter into contracts.
Similarly, individuals who miss a professional license renewal deadline may be able to practice their profession once they become current on their licensing requirements. This can result in lost income and a damaged reputation.
Missing a filing deadline can also trigger audits and investigations — which are never a pleasant experience.
For example, if you miss the tax filing deadline, the IRS may decide to audit your tax return to ensure that you have reported all of your income and deductions accurately. This can be a time-consuming, stressful, and confusing process, even if you ultimately come out of it unscathed. (We’ve gone into greater depth on what to do if you are being audited previously on this blog.)
Other types of filings may also trigger audits or investigations. For example, suppose you miss the deadline for filing financial statements for a private fund. In that case, the Securities and Exchange Commission (SEC) may decide to investigate the fund for potential securities law violations.
If you haven’t filed your tax return, the best first step, to put it succinctly, is to do so — immediately or as soon as possible. While you may still face penalties and interest, the longer you wait, the worse the consequences are likely to be.
If you cannot file the paperwork, consider hiring a professional. You can also negotiate with the agency that oversees the filing to see if they will waive or reduce the penalties and interest. This is more likely to be successful if you have a good reason for missing the deadline, such as a medical emergency or a natural disaster.
If you cannot pay your taxes in full when you file your return, you can set up a payment plan with the IRS. This will allow you to pay your taxes over time rather than all at once. However, you will still be charged interest on the unpaid balance.
Here are some further tips that may help:
No matter how or when you file, you should keep a copy of your tax return and all supporting documents.
Taxpayers have fundamental rights under the law that protect them when interacting with the IRS. The Taxpayer Bill of Rights presents these rights in 10 categories. IRS Publication 1, Your Rights as a Taxpayer PDF, highlights these rights and the agency’s obligation to protect them.
While missing the deadline to file your tax returns can be a costly mistake, there are options available to help you minimize the penalties and interest you will owe. You can limit the damage and get back on track with your tax obligations by taking action as soon as possible.
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Above & Beyond
New York City
2 West 45th Street, Suite 1208
New York, New York 10036
565 Taxter Road, Suite 105,
Elmsford, New York 10523
Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.
He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.
His business experience includes:
Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.
Jeff also has a long history of helping individuals manage their taxes and plan their finances including:
Income tax planning and strategy.
Filing quarterly and annual taxes.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.
Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.
Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004. After a career of public accounting and general management, Jody knows the value of good financials. Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.
He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles. His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.
He has a particular expertise in early-stage growth companies. His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.
Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller. He has experience across industries, which gives him a deep understanding of business.
Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.
In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.
He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.
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