Can’t Meet The Income Tax Deadline? Here’s What You Need To Know

The deadline to send in your 2021 tax return is rapidly approaching—April 18—but millions of Americans have yet to file.

According to the IRS, 15.2 million taxpayers are expected to request an extension to file last year’s tax return. It’s a significant increase from 2021, when the IRS estimated taxpayers filed about 13 million extensions.

And while the IRS encourages taxpayers to submit Form 4868 to request an extension by the due date, there are some taxpayers who can’t make the deadline.

If you’re unable to file an extension or your tax return by tax day, here’s what you need to know.

If You Owe, Pay as Much as You Can To Reduce Penalties

Although there’s no penalty for submitting your taxes late when you’re expecting a refund, the IRS may assess penalties if you owe taxes. 

Even if you miss the tax deadline, you should pay as much as possible as soon as you can. Taking this step can reduce any interest or penalties on your tax account, such as the Failure to File or Failure to Pay Penalty.

If you file your tax return late, the IRS may assess the Failure to File Penalty for failing to pay unpaid tax due on the original due date (not the extended tax due date). Unpaid tax is the tax required to be reported on your return less any withholding, estimated tax payments, and refundable credits.

The IRS calculates the Failure to File Penalty as 5% of the unpaid taxes for each month (or part of the month) that the tax return is late. However, the penalty won’t exceed 25% of your unpaid taxes.

You may also be assessed a Failure to Pay Penalty if you fail to pay taxes you report on your return by the original due date or an approved extended deadline, such as a federally declared disaster. Taxes that remain unpaid for a month (or part of a month) will be assessed a Failure to Pay Penalty of 0.5% per month.

In months where both the Failure to File and Failure to Pay penalties apply, the Failure to File penalty will be reduced by 0.5% (the same amount of the Failure to Pay penalty). So instead of a 5% Failure to File Penalty for the month, you’ll be charged a 4.5%.

For example, let’s say you didn’t file or pay your taxes of $5,000. If the IRS assesses both the Failure to File and Failure to Pay penalties in one month, you will owe a penalty of 5% or $250 ($5,000 x 5%). Basically, that’s a .5% Failure to Pay penalty and a 4.5% Failure to Pay penalty for one month.

Even if you file a timely extension with the IRS, remember that it won’t extend the deadline to pay nor will it prevent penalties. To avoid incurring additional interest or penalties, you should estimate your taxes and pay any amount due by the original tax deadline.

To get a better understanding of how penalties may affect your account, speak to a tax professional to determine which penalties may apply to your tax situation.

Request Your Tax Refund Before You Lose It

It’s still a good idea to file your taxes after the due date if you expect a refund, but you don’t want to wait too long.

The IRS usually allows you three years from the due date of your tax return to request a refund. After this time, you’ll forfeit your tax refund. For example, your 2021 tax return is due on April 18, 2022. From that date, you have three years to request a refund. In 2025, if you don’t file your 2021 return by the tax due date, you’ll lose your tax refund. The U.S. Treasury now owns your money.

That means if you’re one of the estimated 1.5 million taxpayers owed money on their 2018 taxes who have yet to file, you’re running out of time.

The IRS said it has $1.5 billion of unclaimed 2018 tax refunds, but these taxpayers must claim it by April 18. Maine and Massachusetts tax filers have until April 19, because the tax deadline falls on Patriot Day, an official holiday observed by both states.

But even if you don’t owe, the IRS may still expect you to file a return. 

If you’re missing your tax documents from a prior year, you can request it from your employer, bank or other third party, such as an educational institution or student loan provider. You can also request missing tax forms from the IRS by using the Get Transcript Online tool or creating an IRS online account. 

You Can Still File Your Taxes for Free After the Deadline

If you miss the tax deadline—for any reason—most taxpayers can file their taxes for free. However, don’t want to wait too long.

The IRS offers the Free File Program, which allows any taxpayer with an adjusted gross income (AGI) of $73,000 or less in 2021 to file for free.

The Free File program guides taxpayers through a step-by-step process by answering simple questions. You can choose from a listing of tax software providers, such as TaxSlayer and TaxAct to file. And while you can file most federal forms for free, you may have to pay an additional fee for state tax return filings.

The IRS program is usually available until mid-October each year.

If your income is greater than $73,000, you can choose the IRS Free File Fillable Forms. But keep in mind that you’ll need to do more work to file. The Free Fillable Forms allow you to file electronically, but provide limited guidance and calculations.

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