The deadline to file your tax return or a tax filing extension in 2023 was April 18th. The Internal Revenue Service (IRS) will begin levying penalties and interest immediately if you missed the deadline…but only if you owe taxes.
What If You Owed the IRS for Your Taxes This Year?
If you owe the IRS this year, you need to file your tax return as soon as possible. The IRS levies steep penalties against people who fail to file their tax returns on time when they owe additional tax payments.
The penalty for failing to file a tax return is 5% of your unpaid balance monthly, capped at 25%. On top of that, the IRS charges interest. So if you owed $1,000 on April 18th, you could owe $1,250 by September, plus interest.
However, the penalty for filing late isn’t nearly as steep. The penalty for late payment is 0.5% monthly and capped at 25%, plus interest. If you pay in September, your total tax debt would be $1,025 plus interest.
Besides the penalty for failure to file, there is also a penalty for failure to pay. After five months, the failure-to-file penalty reaches its cap. However, the failure-to-pay penalty will continue to accrue until it reaches its cap. Altogether, you could end up paying 47.5% of your total tax debt in penalties before interest.
However, if you file your return 61 days late or more, the minimum penalty for failure to file is $435 or 100% of the tax required, whichever is less. Because the language can be confusing, taxpayers urged to file their returns by IRS notices should consult a tax professional to ensure their forms are correct.
What if the IRS Owes You a Refund on Your Taxes This Year?
If the IRS owes you a refund, congratulations! You don’t have to worry about penalties or interest. What you do need to know is that the statute of limitations to file your tax return and claim your refund is three years. If you failed to file this year or any year since 2020, the deadline is approaching quickly to file your return for your refund.
Additionally, even if the IRS owes you a refund, you will still receive notices in the mail to file your return. The IRS can’t confirm that you don’t owe them a tax debt until you file your return with all of your income and earnings information. Even if you don’t think your refund will be worth much, it could be worth it to file your return just to stop the IRS notice letters.
Options for Filing Late with the IRS
If you failed to file your tax return or an extension by April 18th, you have some other options:
- See if you qualify for an automatic extension. Military members, military support personnel, and other taxpayers who live and work outside of the U.S. and Puerto Rico may qualify. Some disaster victims may also qualify.
- Set up installment payments. If you haven’t filed because you can’t pay now, you can contact the IRS to set up a payment plan.
- Prove financial hardship. You can “offer in compromise” to reduce your tax liability.
Contact an Experienced Tax and Accounting Firm in Florida or Michigan
If you receive a notice for taxpayers urged to file returns from the IRS, contact us at Levy & Associates Tax Consultants. Call 800-TAX-LEVY (800-829-5389) or contact us online to speak with a tax professional at our offices in Delray Beach, FL, or Lathrup Village, MI.