What if I Didn’t File by the Tax Deadline?
Potential Consequences of Filing Taxes Late
What if I Missed the Tax Deadline? Can I File Late? When to Worry
In recent years, the tax gap between the amount of income taxes owed to the government and the level of tax money the government receives has been growing. In 2020, over $601 billion of income taxes went unpaid; in 2021, that number grew to $688 billion.
That said, if you recently missed the Tax Day deadline or you’ve failed to file your taxes over the past few years, don’t panic. You can always take steps to rectify your situation and get back on good terms with the IRS.
Depending on the level of your delinquency, though, you could already be facing several consequences as a result of non-payment. If you are worried about the consequences of unfiled taxes, your best option is to contact a tax lawyer who can provide personalized legal advice regarding your specific situation. Below, we’ll go over a few general tips on how to handle missing the tax deadline and when you should start to worry.
Individual Tax Deadlines: What You Need to Know
The average taxpayer only needs to file their taxes once a year. In most years, the filing deadline is April 15th. If that specific date falls on a Saturday, Sunday, or legal holiday, then the official tax day is moved to the next business day following April 15th. In 2023, for instance, the official tax deadline was April 18 due to Emancipation Day and the weekend.
If you know the official tax deadline is fast approaching and you aren’t ready to complete your returns, you can request an extension. This extension can provide you with up to six months of extra time to complete all of your returns. Keep in mind, though, that this extension applies to the filing aspect of your taxes only. If you do not pay by the deadline, you could still be subject to late fees, penalties, and interest, even if you are approved for a filing extension.
Note, however, that the fees for filing late are 10 times higher than the fees for paying late. Thus, even if you can’t pay right away, you should still file or request an extension.
Business Tax Deadlines
The due dates for business tax returns vary based on the type of return. For instance, employers must issue W2 forms and 1099 forms by January 31st. Payroll tax returns are due quarterly on Jan 31st, April 30th, July 31st, and October 31st. Partnership and S-corp returns are due March 15th. Corporate returns are due April 15th if you use a calendar year, but corporations that use a fiscal year have a different deadline.
For business returns, you will incur penalties for late filing even if the return isn’t associated with a tax due. Usually, if a tax isn’t due with the return, the fee is a set dollar amount per late return.
Immediate Implications of Missing a Deadline
If Tax Day comes and goes without you filing or paying what you owe, then you could immediately become subject to civil penalties in the form of monetary penalties and accruing interest.
If you didn’t file in time, you could face a failure-to-file penalty, which amounts to 5% of your unpaid tax balance. This penalty adds up monthly and maxes out at 25% of your overall tax balance.
If you do not pay in time, you could also face a failure-to-pay penalty, amounting to .5% of your overall tax balance. This penalty adds up monthly and maxes out at 25% of your unpaid taxes.
In addition to these penalties, the IRS will also charge you interest on top of what you owe. Interest will continue to accrue as long as you owe the IRS.
IRS Notices and What They Mean
When you miss Tax Day, the IRS will alert you about your situation and remind you about your account’s outstanding balance or late filing status. You will be notified through the mail with an official IRS notice. Here are a few of the types of letters you could receive and what they mean:
- CP59: No IRS record of filing personal tax returns.
- CP63: Notice of a failure to file tax returns and IRS seizure of future tax refunds.
- CP259: Notice saying that you are required to file a tax return and have not done so.
- CP515: No record of filing prior tax returns.
- CP516: A second notice of not receiving prior tax returns.
- CP518: Final reminder notice that you didn’t file prior tax returns.
- CP518B: Final reminder notice that you didn’t file prior tax returns.
- CP2566: IRS calculated your tax, penalty, and interest based on income reported by employers and others after not receiving your tax return.
- CP2566R: Second notice after not receiving a reply to a CP63 notice that states the IRS has assessed your tax burden based on income reported by employers and others.
- CP3219N: The IRS didn’t receive your tax return and instead assessed your tax burden based on income reported by employers and others
Consequences of a Failure to Pay Taxes
When you fail to pay your taxes on time, you’ll be subject to a .5% penalty every month until you pay your balance or the cap of 25% is reached. While this percentage may not seem that high, it can add up quickly, especially if you owe a significant balance to the IRS. Additionally, this penalty increases to 1% per month, after the IRS sends you a certain notice.
On top of that, interest will accrue on the balance you owe, so a seemingly minor tax bill can quickly spiral into a huge debt when it goes unaddressed long enough.
Failure to File Consequences
If you can’t pay your taxes in full but can file your returns, it’s in your best interests to go ahead and file your taxes ASAP. The failure-to-file penalty is much steeper at 5% of the unpaid tax balance for each month your return is late. Like the failure to pay penalty, the failure to file penalty maxes out at 25% and interest will accrue on unpaid debt.
Common Myths About Unfiled Taxes
One of the biggest reasons that taxes go unpaid or unaddressed by taxpayers is because those individuals believe in myths about the IRS, the tax system, or tax evasion. Below, we’ll help dispel some of the most common myths Americans believe about taxes so that you don’t fall victim to believing a falsehood.
Owing Taxes Isn’t a Big Deal
When you owe the IRS money, it’s a huge deal. Delinquency will start to impact your finances and could even result in criminal charges if you intentionally ignore your burdens.
The IRS Won’t Have Time to Collect What You Owe
Another huge misconception is that the IRS doesn’t have the time or resources to pursue collection efforts. This is far from the case. In fact, in recent years, the IRS has hired more agents in an effort to boost collection efforts.
In 2023 alone, the IRS hired 3,700 new agents specifically to help expand tax compliance for large businesses and partnerships. That said, you never want to rely on the hope that the IRS won’t have time to go after you for what you owe.
In 2023, it’s also easier than ever for IRS agents to execute tax collection efforts. In 2023, the agency invested over $60 billion to help fund the use of technology in collection efforts. With technology, the agency will need fewer agents to collect more.
The Rich Don’t Pay, So I Don’t Have To
Unfortunately, many Americans wrongly believe that wealthier individuals simply ignore their tax burdens. While some wealthier individuals skirt their tax obligations, most Americans who owe taxes pay them as they should. Don’t let the mass media’s myths make you believe that you’re being forced to pay taxes when those who are better off financially are not.
Taxes Are Unconstitutional
Even if you strongly hold this opinion, the courts disagree. This argument against taxes can’t help you avoid the consequences of not filing. Unfortunately, there’s almost no way to completely avoid paying taxes. Even if you don’t have taxable income, you will likely pay sales or property tax.
How Missing a Tax Deadline Impacts Your Personal Finances
When you miss a tax deadline, the IRS will initially be lenient with you and give you some time to pay what you owe. If you don’t get in touch with the agency, though, they might start utilizing collection efforts that could massively impact your financial future.
Substitute for Return
If you continue to willingly ignore your tax situation and fail to file your returns, then the IRS might simply decide to file your taxes for you based on the information they have. This process is called a substitute for return, and it means that your tax situation has been assessed by an agent rather than yourself. When that happens, the agent could miss out on important tax deductions or credits you’re eligible for based on your situation. The agent likely will not miss out on assessing your tax liability, though, so you could wind up having a tax bill that’s bigger than what it would be if you filed your tax returns on your own.
IRS Collection Enforcement: Wage Garnishment
When the IRS knows you’re receiving wages but willingly ignoring your tax situation, they can issue wage garnishment as an enforcement action. When the IRS garnishes your wages, it means that they will send a notice to your employer. Your employer will be ordered to withhold a percentage of your paycheck and send it directly to the IRS.
Your employer does not have the authority to decline to comply with the order. This garnishment will continue until your balance is paid off or you make other arrangements to pay your debt.
IRS Collection Enforcement: Tax Liens and Levies
Your wages aren’t the only thing that the IRS can levy in an attempt to collect what you owe. If you own property that could be sold to cover your debts, the IRS might issue a tax levy against that property. A tax levy gives the IRS the legal right to seize your property to pay the taxes you owe. A lien is a legal claim against the property, which means your property may not be seized, but if you attempt to sell it, the IRS will have a claim to anything you earn from the sale.
Your Borrowing Power Will Take a Hit
In the past, a tax lien would appear on your credit reports, dissuading lenders from lending to you. Thankfully, this changed in 2018. Now, tax liens are no longer reported on your credit score.
Your tax delinquency won’t directly impact your credit report or score, but you could still have trouble seeking new credit. Lenders can still find out about your tax lien with a quick public records search or by performing a background check.
Possible Criminal Charges
One of the most severe consequences you might face is criminal charges as a result of your noncompliance. Willfully and knowingly ignoring a tax debt is a criminal offense. It’s also a criminal offense to lie on your taxes in an attempt to lower your tax liability. Both tax fraud and tax evasion can result in significant jail time, fines, and professional and personal consequences.
Steps to Resolve Unfiled Tax Issues
You’re not alone if you have unfiled or unpaid tax issues. The IRS handles thousands of similar cases every year. You can negotiate with the IRS and come up with a solution that works for you and the tax agency.
First, you’ll want to review your financial situation to determine your ability to pay and how much you owe. From there, you’ll want to learn more about your options, which might include a payment plan or negotiating your balance down. Once you contact the IRS, you can finalize a plan and return to good standing.
When You Need a Tax Professional’s Help
Tax representation isn’t always necessary, but there are times when you will need a tax professional’s help. You should always consider hiring a legal representative if you’re facing criminal charges, you could suffer legal repercussions over your tax situation, or your essential property is at risk of being seized.
You might also need a tax professional’s help if you’re experiencing financial hardship and need help proving to the IRS that you’re acting in good faith and attempting to get back in good standing with them. You might also want a lawyer’s help when you’re unsure about your legal rights or options.
Late Taxes: FAQs
Do you still have more questions about your tax situation? Get answers to some of the most frequently asked questions about late tax returns, delinquent tax bills, IRS enforcement actions, and tax resolution solution options below.
Can I File My Taxes Now If I Missed the Deadline?
Yes. The sooner you file your taxes, the better your situation will be overall. If you owe the IRS, then you’ll still owe the penalties, fees, and interest that accumulated on your account, but you will stop accruing additional failure-to-file penalties. If the IRS owes you a refund, then you might still be able to collect some of the money if it has been less than three years since the original due date on the taxes.
Can You File Taxes Late?
Yes. The IRS encourages taxpayers to file their tax returns as soon as possible even if it is past the deadline. In the best-case scenario, the IRS might still owe you some money in unclaimed refunds. At the very least, you’ll stop accruing additional failure to file penalties on your account.
What if I Forgot to File my Taxes?
If you forgot to file your taxes, then you should collect your financial documents as soon as possible and begin the process of filing your returns. The faster you file your taxes, the better your tax outcome will be for you.
What Happens if I File Taxes Late?
If you file your taxes late, then you could be subject to fines and penalties. You will receive notices from the IRS regarding your delinquency. If you continue to fail to respond, then the IRS will progress in pursuing collection efforts.
When Is It Too Late to File Taxes?
In general, it’s never too late to file your tax returns with the IRS to get things straight. Keep in mind, however, that the older your tax situation is, the less likely you are to be able to produce the documentation to prove your income or financial situation.
The IRS has a statute of limitations on collecting tax debts. In general, there’s a 10-year time limit, but the timer doesn’t start until you file. There is no time limit for the IRS to assess tax against you if you haven’t filed.
What If You Haven’t Filed for 10 or More Years?
If you haven’t filed for a decade or more, you may only need to file the last six years of returns. In this situation, consult with a tax attorney. They’ll be able to help you figure out what you need to file. If you do end up filing old returns unnecessarily, then you could accidentally re-start that collection statute of limitations.
Are You Allowed to File Taxes Late?
Yes. All taxpayers can file their taxes late.
What If I’m Self-Employed and Didn’t File?
When you work for someone else, your employer withholds taxes and pays them to the IRS. If you’re self-employed, then you need to withhold a percentage to pay to the IRS. As a result, self-employed people with unfiled returns often have bigger bills than employees.
Do You Want to Discuss Your Options With a Tax Attorney?
Missing the Tax Day deadline and being in poor standing with the IRS can feel intimidating, especially if you’ve recently received a notice about a collection effort. If you are facing collection efforts or legal consequences due to your current tax situation, it’s time to get in touch with a tax resolution attorney for help.
Together, you and your lawyer can determine your ability to pay and your options. From there, your attorney will negotiate with the IRS to come up with a solution that works for everyone involved. Are you ready to discuss your situation with a lawyer? To get help now, schedule a meeting with the W Tax Group today to start resolving your tax situation.
