Missed The April 18, 2018 Tax Deadline And Owe Tax?

File by June 14th to avoid higher late-filing penalty.

Taxpayers who owe tax and file their federal income tax return more than 60 days after the deadline will usually face a higher late-filing penalty.

Ordinarily, the late-filing penalty, also known as the failure-to-file penalty, [IRC §6651(a)(1)] is assessed when a taxpayer fails to file a tax return or request an extension by the due date. This penalty, which only applies if there is unpaid tax, is usually 5% for each month or part of a month that a tax return is late.

But if a tax return is filed more than 60 days after the April due date — or more than 60 days after the October due date if an extension was obtained — the minimum penalty is either $210 or 100% of the unpaid tax, whichever is less. This means that if the tax due is $210 or less, the penalty is equal to the tax amount due. If the tax due is more than $210, the penalty is at least $210.

The late-filing penalty will stop accruing once the taxpayer files a 2017 income tax return which should be done no later than Thursday, June 14, 2018.

If You Filed An Extension …

This late filing penalty will not apply as long as you file your 2017 individual income tax return by October 15, 2018.

If You File The Tax Return Late And It Shows An Overpayment …

This late filing penalty will not apply but keep in mind that if you wait more than two years to file the tax return, you will look your right to secure the refund.

Late Payment Penalty Still Applies

An extension to file is not an extension to pay. All 2017 individual income taxes are due by April 18, 2018. The late-payment penalty, also known as the failure-to-pay penalty, [IRC §§6651(a)(2) and 6651(a)(3)] is usually ½ of 1% of the unpaid tax for each month or part of a month the payment is late. Interest, currently at the rate of 5% per year, compounded daily, also applies to any payment made after the original April 18, 2018 deadline. By at least paying what you can with your tax return filing or extension filing, you are reducing future late-payment penalty and interest charges.

After a return is filed, the IRS will figure the penalty and interest due and send a bill to the taxpayer. Normally, the taxpayer will then have 21 days to pay any amount due but if you cannot pay the amount in full, you should not ignore this as unresolved tax problems only get worse.

Penalty relief may be available

Taxpayers who have a history of filing and paying on time often qualify to have the late filing and payment penalties abated. A taxpayer usually qualifies for this relief if they haven’t been assessed penalties for the past three years and meet certain other requirements. Even if a taxpayer does not qualify for this special relief, they may still be able to have penalties reduced or eliminated if their failure to file or pay on time was due to reasonable cause and not willful neglect.

Payment options

Many taxpayers delay filing because they are unable to pay what they owe but in order to get into a payment plan, you must be in current filing compliance. Furthermore, a payment plan can only include those tax periods with outstanding balances from tax returns that you filed and you must promise not to file new tax returns with unpaid balances or else your payment plan will go into default.

Depending on how much you owe will drive how much verification information/documents that IRS requires to consider a payment plan.  If you owe more than $50,000 in taxes, the IRS will require full verification of your financial information.  Likewise, if you are self-employed, you can expect the IRS to look at your financial information.

For any taxpayers looking to settle their outstanding IRS liabilities with an Offer In Compromise, the IRS always requires full financial disclosure.

What Should You Do?

If you owe more in taxes than you can afford, you should work with the tax attorneys at Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles County (Long Beach) and elsewhere in California. Let us analyze your situation seek abatement of penalties and come up with the best payment/settlement options that are right for you