The Facts You Need to Know About Unfiled Taxes and Paying Penalties

December 20, 2021 | Unfiled Tax returns

The Facts You Need to Know About Unfiled Taxes and Paying Penalties

For most IRS taxpayers, April 18, 2022, is the annual deadline for filing their federal income tax returns and other due taxes for the preceding financial year. It is very important for every taxpayer of the United States of America to file their tax returns before or on the annual deadline of filing tax returns as the consequences of late filing can be harsh for them. Many harsh penalties, higher interest rates on due taxes, and even criminal charges can be levied on taxpayers if they fail-to-file or fail-to-pay their taxes.  As a taxpayer, you must always be prepared for a tax season. It is important because filing returns is a hectic and lengthy process. Also, there are many things you need to be careful of such as the amount of return you are required to pay to the IRS.  If you already have faced a tax season or filed your returns in the previous years, it would not be very difficult for you. But yes, if it is your first time filing your federal income tax returns, it can be a bit tough for you. Therefore, you need to prepare yourself. The best way to handle filing tax returns is to hire a professional tax attorney, tax law firm, or search for unfiled tax returns help. They will definitely help you a lot with this. Also, you will learn a lot of important things about filing your returns from them.  Well, in this piece of writing, we have covered very important facts about unfiled taxes and paying penalties that you must know before the entrance of tax season. These facts will help you understand the values of filing your federal income tax returns on time and the consequences of late filing. These will also help you process your tax season smoothly and hassle-freely. Let’s explore what those facts are. 

Eight Facts About Late Filing and Penalties

Late Filing Makes You Pay Penalties- As a taxpayer, you must have known about the fact that late filing makes you pay penalties. Generally, penalties are levied when you fail to file your returns by the tax filing deadline and when you fail to pay all the taxes that you owe by the tax filing deadline. So, it’s crystal clear that you will have to pay penalties (the amount of penalty will depend on your case) if you miss filing your returns by the deadline.  Failure-to-file Penalties are Higher than Failure-to-Pay Penalties- There are two types of penalties on unfiled taxes. First is the failure-to-file penalty that is levied on failure to file tax returns by the deadline. Then there is a failure-to-pay penalty, that is levied on failure to pay all the taxes that are owed by the taxpayer by the tax deadline. Generally, failure-to-file penalties are higher than failure-to-pay penalties. To avoid these penalties, you must pay all your taxes by the deadline each year. If you are unable to pay the full amount of your taxes, you should try to pay as much as you can. If paying taxes is creating financial hardship for you, you can explore for a loan or can contact the IRS. The IRS will work with you.  Failure-to-File Penalty Percentage on Unfiled Taxes- Normally, the minimum penalty on unfiled taxes is 5 percent each month and the maximum penalty is 25 percent each month. The penalties start accruing from the day after the tax deadline. Failure-to-Pay Penalty Percentage on Unfiled Taxes- Failure-to-pay penalty is ½ percent of 1 percent of your unfiled taxes. It will start the accruing day after the tax deadline and you will have to pay this each month. If You Request an Extension- In case, if you are not sure whether or not you will be able to pay the full amount of your federal tax by the tax deadline, you can request an extension. And if you request an extension and pay 90 percent of your tax, you may avoid a failure-to-pay penalty.  If You Are Levied Both Penalties in Any Month- In case if you are levied both a 5 percent failure-to-file penalty and ½ percent failure-to-pay penalty in any month, you will have to pay a 5 percent penalty for both. I If You are More Than 60 Days Late to File Your Taxes- If you file your returns more than 60 days after the tax deadline or extended tax deadline, the minimum penalty you will have to pay is $135 or 100 percent of the unfiled tax. If You Have Reasonable Cause- If you have reasonable cause for the failure-to-file or failure-to-pay, you can avoid tax penalties. However, you must have proof that can stamp the reasonable causes you have.  So, these are some very important facts and information that every taxpayer should know before the arrival of tax season. Apart from these, there are many things you should know about such as Offer in Compromise, Installment Agreement, Partial Installment Agreement, etc. These IRS schemes can help you reduce the burden of your tax debts. You can learn about these things by visiting the official website of the Internal Revenue Service or consulting with an IRS tax professional.  So, how long does the IRS have to come after you if you have unfiled taxes? Unfortunately, forever. The agency has an unlimited amount of time to assess taxes against people who haven’t filed. If you haven’t filed in years, the IRS can assess a bill for every one of those years and demand that you pay it. In every case, it’s better to proactively come forward — then, generally, you only need to file the last six years. Once the taxes are assessed, the IRS may not come after you right away, but they will come after you soon.  

Attorney Timothy Hart

Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]