Finance Forward Blog

As the April tax filing deadline draws near, the pressure intensifies to have your return completed accurately and on time. However, things don't always go as planned. Between gathering documents, dealing with complex tax situations, and handling life's unexpected curveballs, it's understandable that some filers may miss the deadline despite their best efforts.

While missing the tax filing date is certainly not ideal, it doesn't have to turn into a recurring financial nightmare if you take quick, proactive measures to correct the situation. Here's what you need to know about the potential consequences and the steps you should take to minimize penalties and interest charges from the IRS on your personal tax return.

The Sting of IRS Late Penalties

If you owe money to the IRS and miss the filing deadline, the first consideration will be the failure-to-file penalty. This penalty amounts to 5% of the unpaid tax bill for every month (or partial month) that your return is late. However, this penalty tops out at a maximum of 25% of your total unpaid tax liability once the return is filed.

The second considerations after the failure-to-file penalty, the IRS also imposes interest charges on any unpaid tax balance remaining after the filing due date has passed. The interest rate compounds daily until your tax bill is paid in full. While not as exorbitant as the failure-to-file penalty, interest charges can still add up substantially over time.

Take These Steps to Minimize the Damage

While missing the deadline is never the preferred outcome, it happens. The important thing is taking control of the situation swiftly to correct it. Here are the smart steps to take:

1. File your completed return immediately: Make it your goal to file as soon as you can. The sooner you file, the sooner the failure-to-file penalties stop accumulating.

2. Pay what you can upfront: When filing late, aim to pay as much of your outstanding tax liability as possible. Paying upfront minimizes interest charges on any remaining unpaid portion.

3. Arrange an IRS payment plan: If you are not able to pay your full tax bill immediately, you can set up an installment plan with the IRS to pay over time. The fees for a payment plan are typically much lower than credit card interest, by comparison.

4. Stay compliant with IRS notices: Be sure to take action according to the instructions on any IRS correspondence if possible.

The Best Solution—File for an Extension

Of course, the ideal way to avoid the failure-to-file penalty is to request an automatic extension of time to file from the IRS if you need more time to handle your return. This grants you an additional six months to file, pushing your deadline to October 15th.

It's important to note that an extension only provides more time to file your paperwork—not more time to pay. You'll need to estimate your tax liability and pay that projected amount by the original filing deadline. If you need help with this step, don’t hesitate to reach out to our tax team!

We’re Here to Help!

While missing a tax deadline is undoubtedly stressful, it's essential to remember that it's just one aspect of your financial journey. Armed with the steps above, you can take action and use this experience as a learning opportunity. Should you need any assistance in next steps, our experienced tax team would be eager to take the burden off your shoulders and help get you back into compliance as smoothly as possible! Don’t hesitate to reach out on our contact page.