Taxpayers have varying reasons for missing a tax deadline. It could be due to an important life event or emergency, an intentional deferral of filing due to a busy schedule, a need for more time to complete tax documents, or simple because they forgotten to file at all.
But just recently, the Internal Revenue Service (IRS) shared what taxpayers who missed the mid-April tax deadline should do to minimize penalties and interests. Here’s our take and highlights that you should no longer miss.
File a Return and Pay Taxes Owed A.S.A.P.
The IRS encourages taxpayers who owe taxes but missed the April tax filing deadline without requesting for an extension to immediately file a tax return to lessen penalties and interest.
This is because on top of the IRS’ 0.5% failure-to-pay penalty, which applies when you don’t pay your tax owed at due date, the IRS also levies a 5% failure-to-file penalty based on your tax balance when you don’t file your tax return by due date or extension date. These penalties plus interests will continue to accrue until the taxes are paid and tax return are filed, capped at 25% of your taxes owed.
If you are self-employed or one of those taxpayers who are required to make estimated quarterly payments but failed to do so may also be charged with an underpayment tax penalty for not paying accurately and on time.
Those with tax balances should pay as much as they can to reduce penalties and interests. This is true even if you requested for an extension. Remember that an extension to file is not an extension to pay.
For taxpayers who cannot afford to pay their tax bill, the IRS has provided several options to help them such as obtaining a loan, applying for payment plans, and other payment options that are available to qualifying taxpayers.
Eligible for a Refund? Don’t Let it Expire and File a Penalty-Free Tax Return
Those who opted not to file a return because their earnings were below the filing requirement threshold are urged to file a return to claim potential refundable tax credits such as Earned Income Tax Credit, Child and Dependent Care Tax Credit, and Child Tax Credit.
There is no late-filing penalty when a refund is due, however you cannot claim a refund without filing a return.
The law provides a period of three years to claim a refund. So, if you think you are due a refund from the tax year 2023, then you have until April 2027 to file a return and claim it. But this is not an excuse to procrastinate. Every year, the IRS estimates that there are nearly a million taxpayers who missed the opportunity for refund because they failed to file their tax returns.
As of today, the IRS estimates more than $1 billion unclaimed refunds because people have probably overlooked or forgotten to file their 2020 tax returns. And their time is running out as they only have until May 17, 2024, to claim their refunds. The May 17 date was an extended deadline from the normal April due date in response to the COVID-19 pandemic emergency.
If you miss the three-year window to claim your refund, it becomes the property of the U.S. Treasury.
Electronically File and Pay Taxes Owed
The fastest way to receive your tax refund is to electronically file your return and have the IRS deposit your tax refund for free via Direct Deposit. It is a faster and safer way to receive tax refunds than using paper checks. It is secure, easy to use, contactless, and it eliminates the chances of paper checks being uncashed, stolen, misplaced, or destroyed.
Use the online payment facilities for an easy, fast, and secured way to settle your tax bill. You may pay through IRS Direct Pay, debit or credit card or digital wallet, or their IRS Online Account. Application for payment plans may also be done online. Paying online also provides an immediate confirmation once payment was submitted.
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