July 24, 2019

Nearly every adult in the U.S. must file an annual federal income tax return with the IRS that discloses their income, identifies tax deductions and credits, and states the amount of tax that is owed. What happens if a taxpayer fails to file on time? The consequences could include penalties and interest, as well as limits on the ability to obtain relief if they cannot afford to pay their tax bill.

What Are the Tax Deadlines?

Federal income tax returns are due on April 15 of each year. If the 15th falls on a Saturday, Sunday, or federal holiday, the due date is the next business day. California has the same deadline for state income tax returns.

Taxpayers may be able to obtain an extension of up to six months to file their federal tax return. This typically requires filing an extension form, and paying their estimated tax owed, prior to the April deadline.

I Forgot to File My Tax Return, but I Don’t Owe Any More Tax

If a taxpayer paid all of the tax they owe for the year through income withholding or estimated tax payments, they do not have to send any payment with their return. They will also be entitled to a refund for overpayment.

The taxpayer still has to file a return, but the penalty is essentially nonexistent. The IRS calculates late filing penalties as a percentage of unpaid taxes, which in this case is zero. The downside is that an extension is no longer available after April 15.

The main incentive to file one’s tax return on time is to ensure a timely refund payment. The IRS will not disburse a refund without a tax return. They might actually be happy to hold onto the taxpayer’s money for a while longer, so it is in the taxpayer’s interest to file.

I Forgot to File My Tax Return, and I Still Owe More Tax

The IRS is far more concerned about a late return when it also involves late payment of taxes. The late filing penalty can be up to five percent of the unpaid tax amount, assessed every month until the return is filed.

Late payment penalties consist of one-half to one percent of the unpaid tax amount for every month the bill remains unpaid. Note that the penalty is greater for failure to file a return than for failure to pay taxes on time.

The total amount of late filing penalties may not exceed twenty-five percent of a taxpayer’s unpaid tax bill. If a taxpayer faces both late-filing and late-payment penalties, the total monthly penalty is capped at five percent. If a tax return is more than sixty days late, the penalty could be $135 or one hundred percent of the unpaid tax amount, whichever is lesser.

I Did Not File My Tax Return Because I Can’t Afford My Tax Bill Right Now

This is really the worst of both worlds, because in addition to penalties, you might not be eligible for a payment plan with the IRS. One of the requirements to qualify for a long-term payment plan, which allows you to pay your tax bill over a period of more than 120 days, is to have filed all of the required returns. Once you file the return, you can try to work out a payment plan.

The tax advisors at Enterprise Consultants Group are available to answer your questions about taxes in California. Please contact us online or at (800) 575-9284 today to discuss your case.