You forgot to file taxes! Now what?
Filing taxes annually is a fundamental responsibility for all U.S. taxpayers and the deadline to submit is April 15. However, missing this deadline can lead to a series of consequences. If you forgot to file your taxes, it’s important to understand what happens if you don’t file your taxes on time and the steps you should take to correct the situation.
It will cost you
If you forgot to file your taxes, you may face significant financial penalties. The Internal Revenue Service (IRS) imposes a failure-to-file (FTF) penalty which is 5% of the unpaid taxes for each month or part of a month that your return is late, up to a maximum of 25%. If your return is more than 60 days late, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.
In addition to the FTF penalty, there’s also a failure-to-pay (FTP) penalty. This penalty is 0.5% of your unpaid taxes for each month or part of a month after the due date that the tax remains unpaid, also up to a maximum of 25%.
It’s important to note that if both penalties apply in the same month, the FTF penalty is reduced by the amount of the FTP penalty for that month, resulting in a combined penalty of 5% per month. Understanding these penalties underscores the importance of timely tax filing, but here’s what you should do if you forgot to file your taxes.
Get started now
If you’ve missed the tax filing deadline, it’s imperative to file late taxes as soon as possible to minimize penalties and interest. Begin by gathering all necessary paperwork and documents, such as W-2s, 1099s, and any records of deductions or credits. If you’re unsure about the required documents or how to proceed, CPAs for individuals’ tax situations can help.
You can also file an extension using IRS Form 4868 if you need more time to organize your documents. This extension grants you an additional six months to file your return. However, understand that this is an extension to file, not an extension to pay any outstanding taxes, which are still due by the original deadline.
In case you’re unable to pay in full, the IRS offers payment plans to help manage your tax liability. Options include short-term payment plans (up to 180 days) and long-term payment plans. Payment plans can prevent more severe collection actions and may reduce additional penalties.
Remember: The sooner you address your tax situation, the better you can manage and possibly reduce the financial impact. The IRS is more accommodating to taxpayers who proactively resolve their tax issues.