So you owe taxes and you haven’t filed yet, is there any advantage in waiting or should you file as soon as possible? If your current financial situation is precariously stressed, should you wait until you obtain the necessary funds to pay any taxes due?
Taxpayers that have failed to file tax returns for some extended period of time should file them immediately. Even if taxpayers have filed for an extension, time is of the essence to avoid costly penalties assessed by the IRS. When taxpayers do not file by the April 15th deadline, the IRS assesses failure to file (FTF) and failure to pay (FTP) penalties.
If the IRS assesses both the FTF and FTP penalties, the FTF penalty is reduced by the amount of the FTP penalty. The failure to file penalty is assessed at a rate of 5% per month or partial month up to a maximum rate of 25%. The failure to pay penalty is assessed at a rate of 0.5% per month or partial month up to a maximum rate of 25%.
If a taxpayer filed an extension by the April tax year deadline, it does not provide an extension of time to pay taxes, only an additional six months to file a tax return. Thus, in this situation, taxpayers must estimate any expected amount due and file Form 4868 enclosing such payment. Otherwise, penalties and interest begin to accrue for taxes unpaid by the deadline.
The significance of this is that for taxpayers expecting refunds, there is no penalty for failing to file a tax return by the deadline. This is the case even if the taxpayer does not request an extension. Any penalty for the delinquent filing of a tax return is a percentage of the tax owed for that particular year’s return.
Of course, if expecting a refund, there is no reason to delay since no refund will be provided until the return is filed. It’s simply common sense that to receive a refund as soon as possible, one should file as soon as possible. Also, the statute of limitations for the audit of a return does not begin until a return is filed. It is important to know if any Tax Code elections apply to your situation since some elections must be made by a certain deadline, which may be the due date of the return. A qualified tax professional may help ensure that all elections are properly and timely taken.
For questions or concerns about unfiled tax returns, you should contact the experienced and reliable tax professionals at the Thorgood Law Firm. For a FREE consultation call 212-490-0704.
