In life, two things are certain. Death and taxes are unavoidable. You must pay Uncle Sam when he comes calling.
Tax season starts in January and runs until mid-April, when tax returns are due. The IRS believes this is ample time for Americans to do their taxes. Life can get in the way, which can cause a person to file late.
Each year, 12 million people file their taxes late. Late filing can result in a big mess. If you find yourself having to file your taxes late, you must know about the potential outcomes.
Read on to learn eight things you need to know about late filing.
1. Why Do People File Their Taxes Late
The timeline the IRS establishes gives people ample time to prepare their taxes. Millions of taxpayers still miss the tax filing deadline. There are several reasons why people file late.
One of the reasons why so many taxpayers fail to file on time is because they don't know when the deadline to file is. The deadline doesn't always fall on the same date each year. This can create confusion, leading to some thinking they have an extra day to file.
Not receiving vital tax information on time is another reason many people file late. People who don't receive key forms from their employers can find themselves in a bind. Their only option may be to delay filing their taxes.
Some people believe that by not filing their taxes, they can avoid paying it entirely. You should never play with the IRS. The IRS can get your tax information from your employer.
Yes, that's right. The IRS will find out and go after you.
You'll have to ensure that all your information matches on every form. If you commit an error on your taxes, there's a high chance you may get audited. Then you'll have to hire a lawyer who has tax law experience to help you.
2. When Are Taxes Officially Late
Going back to the deadline issue, it seems that this is where the confusion lies. Taxes are always due on April 15, but in 2022, taxes are due on April 18.
Why the change? It turns out that April 16 is a holiday in the District of Columbia. Emancipation Day is behind the change.
Once April 18 passes, taxes are officially late. So circle this date on your calendar to avoid filing late.
3. Penalties Involved With Late Filing
The IRS will impose a penalty for filing taxes late. The penalty one has to pay will depend on the amount of taxes one owes on the return. For each month that passes, one must pay 5% of the amount of tax due.
This penalty maxes out at 25%. If you're more than four months late, you'll owe the max.
4. Preparing Your Tax Returns on Time
What's the best way to file your taxes on time? Creating a schedule that breaks down the process is ideal.
You should know when to expect your W-2 Form from your employer. Most employers send it out by the end of January. You should have all your financial statements and forms in order by the end of January.
Set a deadline to file your taxes. If you need help filing them, schedule an appointment with a tax preparer. Don't wait until the last minute to find someone who works in the area of tax preparation.
5. What To Do if You Are Missing Tax Forms
You find yourself missing a tax form. If this happens, get in contact with the person or organization to get another form. Have them correct the problem ASAP.
6. What To Do if You Are Going To Be Late
It can happen. Despite your best efforts, you find yourself having to file late. What can you do?
In this case, you should file for an extension. The IRS allows taxpayers to file a form if they wish to seek an extension.
If you need one, make sure to request it by the filing deadline. Failing to request it by this day may lead the IRS to deny the extension.
7. How Much Extra Time Does an Extension Give You
If the IRS grants your extension, you'll have six extra months to file. You'll have until October 15.
You should know that an extension only gives you extra time to file your tax return. It doesn't give you extra time to pay a tax that's due. Not paying for it can lead to a penalty.
8. Do You Still Need More Time to File
Here's where things can get a little tricky. It's hard to get more time. There are a couple of scenarios where the IRS may consider granting more time.
The IRS may grant a person a further extension when abroad. This is known as a discretionary extension request. If a person receives it, they will have two more months to complete the tax return.
Members of the armed forces serving in a combat zone can apply for a further extension. A member of the military who receives this extension will be given at least 180 days. The extension takes effect after leaving the combat zone to file taxes.
What To Know If You Are Doing a Late Filing
It's never a good idea to file one's taxes late. Late filing can lead to several issues down the road. The IRS penalties are nothing to play around with.
If you're going to file your taxes late, make sure to keep these eight things in mind. You want to avoid facing tax issues. Contact us to learn how we can be of service to you if you're experiencing tax issues.