Now Is the Time
If you haven’t already filed your 2019 return, regardless of whether you owe taxes or not, now is the best time to file. Don’t be afraid of having to face the penalties and other fees handed down by the IRS. They will work with you. However, they cannot do anything if you haven’t filed your return.
One thing to note – although penalties and interest began accruing as of July 16th on any tax amounts due, the IRS is not penalizing those who are owed a return instead. You will still receive any money owed to you for 2019, regardless of the fact that your return is late. Unfortunately, those who have a balanced owed are not so lucky and must be ready to make the proper arrangements once they have sent in their tax return.
Some May Have an Automatic Extension
In related good news, some people automatically qualified for an extension on their tax filing and payment. For example, if you live in a disaster zone, such as one hit by a hurricane or effected by wildfires, then your deadline may have been extended. In addition, members of the military, including those stationed overseas or in combat zones, have more time to file and pay as well. The IRS extended all of these deadlines as a courtesy because of the overall dire situations these people were facing.
Requesting an Extension
Even though you can request an extension on your 2019 tax return in order to have more time past the due date to file it, you still must pay any amount due. The estimated payment amount is actually due at the time that you request the extension. Otherwise, your payment is considered to be late, and you’ll be penalized further.
If you filed for an extension, that gave you until October 15, 2020 to file. You still however are expected to pay by no later July 15, 2020. Which means failure to pay penalties started if you are carrying a balance. If you cannot pay that amount, you have several options that all involve working with the IRS in order to clear up the debt. Working with a tax professional will help ensure this process goes smoothly and that you don’t end up in bigger trouble.
Penalties and Interest Are Accruing
The day after your tax return and payment were due – July 16th, thanks to the extended deadline, your late payment began accruing penalties and interest. If this is the case for you, there are a few different penalties and types of interest that you’ll be subject to:
Failure to Pay Penalty – The failure to pay penalty adds 0.5% to the amount of back taxes that you owe the IRS for every partial month that your payment is late.
Minimum Penalty – The minimum penalty kicks in once your payment is 60 days late. At that point, you’ll owe the IRS an additional $435 or 100% of the amount due, whichever amount happens to be smaller.
Note that the failure to pay penalty is smaller than the failure to file penalty, which adds 5% onto the amount due for every partial month that your tax return is late. This is yet another reason to file that return now, regardless of whether or not you can make the payment in one lump sum.
Setting Up a Payment Plan
Since many people and businesses have not paid their 2019 tax balance which is due to the IRS because they cannot afford to make the payment or simply do not have enough liquid funds available due to the current pandemic, the IRS has made it easier on taxpayers and is willing to work with you to set up a payment plan.
IRS payment plans do charge interest, so the overall amount paid will be slightly higher than the total due as of right now. However, these payment plans make it easier to clear up your tax debt without being subjected to liens, wage garnishments, or other forms of collection.
As long as you can pay off the debt within five years (for individuals) or two years (for businesses) and agree to a direct debit every month, so that the money goes straight to the IRS from your bank account, they are willing to work with you in order to clear up your tax debt as quickly and painlessly as possible.
Fresh Start Initiative
You may qualify for their Fresh Start Initiative. In order to qualify for this program, you need to meet a number of requirements. In addition, your tax return for 2019 must already be filed. If you think this is something that you’d like to pursue and believe that you may qualify, then you’ll need to speak to an expert tax professional in order to receive additional information and assistance.
If you didn’t pay the IRS any balance due by July 15th, the filing deadline for 2020, then the tax advisors at the Enterprise Consultants Group can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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