September 30, 2020
Due to the COVID-19 pandemic and all its surrounding circumstances, the IRS chose to shift the tax filing deadline. This essentially moved the usual filing date for 2019 taxes from April 15th to July 15th. Whether you owed taxes to the IRS or they owed you a refund for that year, the applicable deadline was still July 15th , giving all taxpayers a few extra months to get their affairs in order. However, now that that date has come and gone, some people may have filed their returns but not paid any amount owed. In addition, others may not have sent in their return at all, either waylaid by the pandemic or afraid of having to pay the IRS an amount that they cannot afford. No matter which category you fit into, it’s important to know that you still have options.
Now Is the Time to File
You must file your 2019 return, regardless of whether you owe taxes or not, now is the best time to file. Yes, you will face the penalties and other fees handed down by the IRS, but with the help of a Tax Professional, they will work with you. However, nothing can be done help you if you don’t file at all.
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 refund. 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.
Even though you may have requested 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.
In order to receive an extension on the return itself, you must fill out the proper form (there are several for individuals, as well as businesses) and submit it with your estimated tax payment. If you cannot pay that amount, then 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 you minimize the damage caused by penalties.
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 and interest that you may be subject to:
Failure to File Penalty – A failure to file penalty is charged on returns filed after the due date or extended due date, absent a reasonable cause for filing late.
- The combined penalty is 5% (4.5% late filing and 0.5% late payment) for each month or part of a month that your return was late, up to 25%.
- The late filing penalty applies to the tax that remains unpaid after the due date. Unpaid tax is the total tax shown on your return reduced by amounts paid through withholding, estimated tax payments, and allowed refundable credits.
- If after five months you still haven’t paid, the failure to file penalty will max out, but the failure to pay penalty continues until the tax is paid, up to 25%.
Note that the maximum total penalty for failure to file and pay is 47.5%. That’s 22.5% for late filing and 25% for late payment. This is yet another reason to file that return now, regardless of whether you can make the payment in full.
Setting Up a Payment Plan
Due to the Covid-19 pandemic many people and businesses have not paid their 2019 tax balances. This could be because they cannot afford to make the payment or simply do not have enough liquid funds available due to the current pandemic. The good news is that the IRS has made it easier on taxpayers and is willing to work with you to set up a payment plan. There are many options, rules, and conditions that need to be considered when approaching the IRS to request a payment plan. It is in your best interest to contact tax professionals such as Enterprise Consultants Group before reaching out the IRS on your own. We are experts in this field, but we also know when it’s best if the taxpayer just approaches the IRS on their own. In other words, we’ll offer service only if it’s a situation where we can make a great deal difference. If we can’t we’ll advise you on a valuable alternative, for free.
You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service’s First Time Penalty Abatement policy if the following are true: You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service’s First Time Penalty Abatement policy if the following are true per the IRS’s policy:
- You didn’t previously have to file a return, or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You have paid, or arranged to pay, any tax due.
- If you received incorrect oral advice from the IRS, you may qualify for administrative relief.
If you didn’t pay the IRS any balance due by July 15th, the filing deadline for 2020, then 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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