Tax season is much later than usual this year. In March, the IRS announced that the federal tax filing deadline, which is typically in mid-April, would be pushed to July 15, 2020.
The move, made in response to the coronavirus pandemic, gave Americans an extra three months to file their 2019 returns without incurring interest or penalties.
Today marks the new deadline, and if you don't file and pay your taxes, you could face some financial consequences.
There are different penalties for not filing your taxes versus not paying them:
- If you don't file, you could face a failure-to-file penalty. The penalty is 5% of your unpaid taxes for each month your tax return is late, up to five months. If you file more than 60 days late, you'll pay whatever is less:a minimum of 100% of the taxes you owe or "a specific dollar amount that is adjusted annually for inflation," explains the IRS. The specific dollar amount is $435 for returns due on or after January 1, 2020. (Note that, in addition to the failure-to-file penalty, you'll also have to pay all of the taxes you owe.)
- If you file your taxes but don't pay them, the IRS could charge you a failure-to-pay penalty. Generally, the IRS will charge you 0.5% of your unpaid taxes for each month you don't pay, up to 25%. Interest also generally accrues on your unpaid taxes. The interest rate is equal to the federal short-term rate, plus 3%.
Even if you can't pay your taxes, be sure to file. In most cases, the failure-to-file penalty is greater than the failure-to-pay penalty. And you can always apply for a payment plan with the IRS to resolve your tax debt.
If you're owed a refund and file late there are no penalties, but you should still file as soon as you can so the IRS doesn't keep your money.
If you won't have time to file your taxes today, you can file for an extension. Anyone can use Free File to electronically request a tax-filing extension, which would give you until October 15, 2020, to file your return, according to the IRS. (That's the same extended filing deadline as prior years.)
Note that an extension to file is not the same as an extension to pay. If you're filing an extension, you still need to estimate any taxes you may owe and pay them by today to avoid possible penalties.
"After July 15, you will begin accruing late payment penalties for any amount you owe," says Kevin Martin, principal tax research analyst at The Tax Institute at H&R Block. "Taxpayers should make an estimated payment with their request for extension to avoid late payment penalties if they expect to owe money."
You can use a free tax estimate calculator to help you figure out how much you may owe.
If you continually ignore your taxes, you may have more than fees to deal with. The IRS could:
- File a notice of a federal tax lien (a claim on your property)
- Seize your property
- Make you forfeit your refund
- File charges for tax evasion
- Revoke your passport
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It's finally here: April 18 is the 2021 federal tax filing deadline for most Americans.
As of April 8, the IRS had received more than 103 million returns and sent 70 million refunds, totaling over $222 billion. But that still leaves millions to be filed with limited time remaining.
Doug Campbell, a CPA and vice president of tax support at Liberty Tax, said there's been a "pretty big spike in returns" that started over the past couple of weeks.
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Just understand you still are going to have to come up with as accurate as possible an estimate of how much tax you may owe.
Doug Campbell
Vice president of tax support at Liberty Tax
However, if you don't qualify for more time and are not ready, there's still time to file an extension, bumping your due date by six months to Oct. 17, Campbell explained.
You can file an extension by sending Form 4868 electronically with IRS Free File, regardless of income, or by making a payment through IRS Direct Pay and choosing "extension" as the reason.
Sending an extension by April 18 may avoid a late filing penalty of 5% of your unpaid balance per month, capped at 25%. But it won't bypass a monthly late payment fee of 0.5%, limited to 25% of taxes owed.
"Just understand you still are going to have to come up with as accurate as possible an estimate of how much tax you may owe," Campbell said.
If you can't cover your estimated balance, you may qualify for a payment plan through the IRS. But you must file an extension or return to be eligible.
What to know before filing
If you're planning to file your return, you can save money with IRS free file if your adjusted gross income is $73,000 or less for 2021, which is roughly 70% of taxpayers. And you can use Free Fillable Forms, if your AGI exceeds $73,000.
You're likely to receive your refund within 21 days by filing an accurate, electronic return with direct deposit. But mistakes may send your return into what the IRS calls "error resolution," requiring manual review, Campbell warned.
Your return should mirror any tax forms the IRS receives, such as your W-2, investment income and more. You'll also want to double-check IRS letters for details on stimulus checks and advance child tax credit payments.
"We urge extra attention to those who received an economic impact payment or an advance child tax credit last year," IRS Commissioner Chuck Rettig said in a statement. "People should make sure they report the correct amount on their tax return to avoid delays."
The IRS mailed roughly 7.4 million "math error" notices for stimulus payment mistakes from Jan. 1 through July 15, 2021, halting refunds, and many are still waiting for a resolution.
"Mistakes are much easier to come by if you're scrambling at the end of the game instead of having everything in line ready to go," Campbell added.