You can’t even use Coachella as an excuse, since at least 10 people thought to use the makeshift post office on the festival grounds to try to mail a last-minute return, but for whatever reason, you either forgot to fill out and mail your tax forms or you just never got around to it.
This is kind of a big deal, because if you owe the government money, you’re going to end up owing a lot more if you don’t get those forms in ASAP.
What happens now?
Sadly, the government doesn’t have an “oops” period. From April 19th onward, you’re delinquent and have begun to incur a failure-to-file penalty, which begins at 5 percent of whatever’s owed to the government (assessed on a prorated monthly basis, not to exceed 25 percent of the tax bill). If you still haven’t filed after 60 days, you’ll incur a $135 charge (or 100 percent of the taxes you owe, if that amount is less than $135).
There is also what’s called the failure-to-pay penalty. This can also apply to someone who does turn in their tax return form, but neglects to send a check for the money they owe. It starts at between 0.5 percent and 1 percent of your unpaid taxes, for each month (or part of the month) that you’re delinquent. So if you wait until May 18 to file, and end up owing the government $1,000, the IRS will demand an additional $50 for failure to file and $5 to $10 for failure to pay.
Things get worse if you wait even longer. After five months, the failure-to-file penalty maxes out at 25 percent, but the failure-to-pay penalties continue until they reach 25 percent of what you owe. In the end, the maximum penalty can reach 47.5 percent (with 25 percent toward late payments and 22.5 toward late filing).
There’s also the possibility of underpayment penalties, which apply when you make a payment and your tax return is deemed incorrect. Those penalties vary depending on whether you are thought to be deliberately negligent—i.e., attempting to defraud the government.
There’s an important exception to the penalty game. If you owe nothing to the government, or if you’re owed a refund, you won’t be charged any late fees. But the money owed to you doesn’t sit around indefinitely waiting for you to file; after three years it defaults back to the government.
Think that’s all? That’s only the federal side of the game. Your state will have its own rules and penalties for their taxes, which are due at the same time as federal ones. Beyond that, some cities have independent tax situations that need to be taken care of separately from your federal and state filing.
What can you do right now?
The first and most important thing to do is file an extension if you’re still allowed to do so. The only excuse the government allows for filing an extension after the deadline is if you were “out of the country” on Tax Day, and that doesn’t mean you were on vacation. It’s a loophole only open to citizens who are working or active military outside the country, and then you only have until June 15 to file your extension.
Even if you did get your extension in before the deadline, the extension doesn’t keep you free of all penalties. You won’t incur the 5 percent failure-to-file, but the clock is still ticking on the tax bill. Even if you don’t know your numbers, the government will charge you the 0.5 percent failure-to-pay penalty until you file your tax return. If you don’t owe taxes, you’re in the clear, but you do have to file before the six-month deadline in October or the penalty clock starts over.
If you were in the country and just didn’t do your taxes, you can’t get any help from extensions and the failure-to-file penalty is in play, you should gather your documents and make the first available appointment with a tax professional in your area. They can help you get the best deductions and help you reduce what you owe, which will in turn reduce your fees.
What solutions does the IRS offer?
When you find out you owe taxes but can’t pay them in full, the most straightforward solution is to enter into an online payment agreement with the IRS. You can apply for one on the IRS web site if, as an individual, you owe less than $50,000 in tax, penalties and interest combined, and all your returns are now filed. There are also short-term options for those with a total bill up to $100,000.
For larger tax issues — say if you aren’t just failing to pay taxes this year, but have failed to do so for many years — there’s also an offer in compromise program, which will allow you to settle your debt for less than you actually owe. The government takes ability to pay, income, expenses and assets in determining whether you’re eligible. There is an online pre-qualifier tool to see whether you fall into the correct category for the compromise program. If the government determines you are unable to pay due to financial hardship, it can also initiate a temporary delay to the collection process, though this doesn’t negate taxes owed. It also does not pause interest and penalties, making it less desirable than the offer in compromise program.
In sum, the best option is to start digging yourself out right now and only end up in a month’s worth of hot water with the IRS. All that compound interest can make even a minuscule tax bill into a colossal headache. And if you’re lucky enough to have money coming back your way, why make an interest-free loan to the government for any longer than you have to? The government definitely wouldn’t do the same for you.
Rae Votta covers the world of digital entertainment for The Daily Dot and writes the newsletter ReadySetGrowup for financial tips. She last wrote about surviving wedding season with your wallet intact for MEL.