Did life get in the way of you filing your taxes on time? Maybe you missed the deadline because you were busy with other things, or you procrastinated because you were nervous about how much the bill to Uncle Sam would be.
There are penalties for filing your taxes beyond this year’s April 18th deadline, and they can add up fast. The good news is that there are also ways to avoid paying these fees altogether. The tax specialists at Levy & Associates Tax Consultants share their insights.
The longer you avoid paying Uncle Sam, the more expensive your tax bill becomes. The reason is that the IRS charges both a penalty for filing late, and interest will continue to accrue on your balance.
The amount you pay in penalties depends on how late you are. If you file more than 60 days after the deadline, you’ll either pay:
1. A minimum of $435, or
2. 5% of your unpaid bill, which continues to increase each month up to a 25% penalty after five months
The 5% figure consists of a 4.5% late filing fee and a 0.5% penalty for paying late. As the months pass, interest accrues, and additional penalties may be imposed. The amounts are determined once you eventually file.
You can avoid paying late fees if you file for an extension. IRS Form 4868 can extend your individual filing deadline, usually to October 15th. If possible, pay a portion of your tax bill when you file for an extension. This maneuver can help you avoid failure-to-pay penalties and keep interest charges to a minimum.
In addition to filing for an extension, other potential methods to avoid late fees include:
– Contact the IRS and request an abatement. This can be done either over the phone or via a letter. If you have a squeaky-clean record with the IRS, you have a decent chance of being let off the hook.
– Check the IRS website for exceptions related to disasters and severe weather. For example, in 2022, residents in parts of Puerto Rico, Tennessee, Washington, and Colorado were granted extensions for storms, flooding, and fires.
– Be eligible for a refund. If the government owes you money, there is no penalty for filing late.
– Show reasonable cause. The IRS may also waive the penalties if you have a legally valid excuse for being late. Examples include death or serious illness of either an immediate family or the actual taxpayer. An unavoidable absence (such as military deployment in a combat zone), mail delivery issues, and erroneous advice from a tax professional may also constitute grounds for waiving a penalty.
People often think they should avoid filing their taxes until they can collect the money and settle their tax bills in full. However, the opposite is true. You should still file within the deadline (or at least request an extension) and then figure out how to gather the money.
Consider getting a loan or line of credit at a more favorable rate than what the IRS charges for late penalties. Even a credit card could be a better option if your card offers reasonable rates.
You may also be eligible for an installment plan and file IRS Form 9465. The form can be filed electronically and is a potential option for tax bills of $50,000 or less.
To get more information or request the assistance of a tax professional, call us at (800) TAX-LEVY for a free consultation.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.