So, the tax deadline has come and gone, and there you are, still with an unfiled tax return. It happens to the best of us! While it’s less than ideal, it’s not the end of the world—or your finances.
Think of it as missing a bus; there’s always the next one, but you might have to wait a bit longer and possibly pay a bit more.
Step 1: File as Soon as Possible
First things first: file your tax return as soon as possible. Every day delayed is more money paid in penalties and interest.
- The failure-to-file penalty racks up 5% of your unpaid taxes for each month your return is late, maxing out at 25%.
- If you’re over 60 days late, the minimum penalty is $485 or the total amount of tax you owe, whichever is smaller.
Step 2: Check If You Need to Pay
If you owe taxes, it’s crucial to minimize penalties by paying as much as you can, as soon as you can.
You can use the IRS’s Online Payment Agreement tool to set up a payment plan if you can’t pay the full amount right away. This step is like making a minimum payment on a high-interest credit card—aim to chip away at the balance to keep the interest monster at bay.
Step 3: Consider Penalty Abatement
For those who missed the deadline due to a genuine oversight or unavoidable circumstances, the IRS does offer penalty relief through their First-Time Penalty Abatement policy.
If this is your first tango with tax penalties, or if you have a reasonable cause like severe health issues or natural disasters, you might qualify for this break.
Step 4: Prevent Future Issues
To prevent future stress and potential penalties, consider adjusting your approach to how you manage taxes:
- Set reminders: Mark important dates on your calendar, like quarterly estimated tax payments or next year’s filing deadline.
- Stay organized: Keep your tax-related documents in one place throughout the year.
- Consult a professional: If taxes really aren’t your cup of tea, a tax professional can handle the heavy lifting and keep you on track.
Limit the Damage and Prepare for Next Year
While missing the tax deadline isn’t ideal, it’s far from a catastrophe. By taking action quickly, you can mitigate penalties and get back on track without too much financial discomfort. Remember, it’s better to face the music now than to let the penalties grow into a financial headache later. Let this be the nudge you needed to tackle your taxes head-on next year.
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Patty Ward
Patty has more than 30 years experience in public accounting. She reviews tax returns for high net worth clients, focusing on individual tax work. Her mission is to provide high level service to her clients, reducing their tax burdens, keeping them informed and instilling confidence.
About Smith Patrick CPAs
Smith Patrick CPAs is a boutique, St. Louis-based, CPA firm dedicated to providing personal guidance on taxes, investment advice and financial service to forward-thinking businesses and financially active individuals. For over 30 years, our firm has focused on providing excellent service to business owners and high-net worth families across the country. Investment Advisory Services are offered through Wealth Management, LLC, a Registered Investment Advisor.
