What is the penalty for late tax filing?
As taxpayers, we understand the importance of meeting deadlines to avoid penalties and maintain compliance with tax laws, but missing the tax filing deadline can happen to anyone, and it’s essential to understand the consequences and steps to resolve the situation.
Penalties for Late Tax Filing:
The Failure to File penalty is applicable at 5% of the unpaid taxes for each month or part of a month that a tax return is delayed. This penalty reaches a maximum of 25% of your outstanding taxes.
If both a Failure to File and a Failure to Pay penalty are incurred simultaneously in a given month, the Failure to File penalty is reduced by the amount of the Failure to Pay penalty for that specific month, resulting in a combined penalty of 5% for each month or part of a month that the return was overdue.
After 5 months of non-payment, the Failure to File penalty will reach its maximum, while the Failure to Pay penalty persists until the tax is settled, up to its maximum of 25% of the unpaid tax as of the due date.
In instances where the return is over 60 days late, the minimum Failure to File penalty is determined based on the following schedule or 100% of the underpayment, whichever is less.
| Return Due Date (without extension) | Minimum Amount |
| On or before 12/31/2008 | $100.00 |
| Between 01/01/2009 and 12/31/2015 | $135.00 |
| Between 01/01/2016 and 12/31/2017 | $205.00 |
| Between 01/01/2018 and 12/31/2019 | $210.00 |
| Between 01/01/2020 and 12/31/2022 | $435.00 |
| Between 01/01/2023 and 12/31/2023 | $450.00 |
| After 12/31/2023 | $485.00 |
When are Taxes Due for 2023?
Tax deadlines vary depending on your business entity:
- Sole proprietorships and S-corps: April 15, 2024
- Partnerships and C-corps: March 15, 2024
- Extensions: October 15, 2024, and September 15, 2024, respectively.
It’s crucial to distinguish between the tax filing deadline and the payment deadline. Extensions only extend the filing deadline, not the payment deadline.
Options for Those Unable to Pay:
If you find yourself unable to cover your tax bill, consider these alternative options:
- Penalty Abatement: You might be eligible for penalty abatement if you have a valid reason for the delay, such as experiencing a significant life event like the death of a family member or being affected by a natural disaster. This option allows you to request the removal of penalties associated with late payment or filing.
- Installment Agreement: An installment agreement enables you to establish a structured payment plan with the IRS to gradually pay off your tax debt over time. This arrangement can provide financial relief by spreading out the payments into manageable monthly installments.
- Offer in Compromise: Negotiate with the IRS to settle your tax debt for less than the full amount owed through an Offer in Compromise. This option requires demonstrating your inability to pay the full tax liability due to financial hardship or other compelling circumstances.
- Currently Non-Collectible Status: Request a temporary delay in tax payment by applying for Currently Non-Collectible (CNC) status. If approved, the IRS will temporarily suspend collection efforts if you can demonstrate that paying your tax debt would create financial hardship, making it challenging to cover both living expenses and tax obligations concurrently.
How to file late taxes?
- To file taxes late, complete Form 4868 to request an extension.
- No explanation is required for filing late—submitting Form 4868 grants an automatic extension until October 15th without incurring the late-filing penalty.
- Remember to make tax payments on time, even with an extension, to avoid penalties.
- Business owners making quarterly estimated tax payments should adhere to the schedule regardless of extension requests.
- Regardless of receiving an extension, you’re responsible for paying all taxes owed, along with accrued interest.
- Delays in payment can result in substantial interest charges, particularly for significant balances.
- If your tax software doesn’t automatically calculate your tax liability, the IRS will provide an estimate of the amount owed via an official letter sent by regular mail.
Late tax filing can result in significant penalties and financial strain, but there are ways to mitigate the consequences. By understanding the penalties, deadlines, and available solutions, individuals can navigate the process effectively and regain compliance with tax obligations.
For more info, book a consultation with us at www.qbtconsulting.com, and make sure to stay up to date with latest news on our blog.
