CARL WATTS & ASSOCIATES

April 25, 2016

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What To Do If You Are
A Late Filer
April 18, the deadline for filing tax returns this year, is behind us now, but those of you who haven’t filed their tax returns yet are faced with the obvious question of what to do now.

You can find here the right answer for you, whether you’re due a refund or owe tax.

There may be a number of reasons why some usually law-abiding people do not file their returns, other than not being required by law to do so; the reason could be as simple as plain procrastination, or some dramatic changes in filing status, such as due to the death of a spouse or divorce.

The good news is that there is no penalty if you're getting a tax refund, provided you file within 3 years of the April 18, 2016 deadline (or October 17, 2016 deadline if you filed an extension). After 3 years, unclaimed tax refunds are forfeited and become the property of the U.S. Treasury. So, don’t risk losing your refund, as well as the right to claim tax credits, and file your present or past due tax returns before the three years period expires.

On top of that, if you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive credits toward Social Security retirement or disability benefits.


Also, loan approvals may be delayed if you don't file your return. Copies of filed tax returns must be submitted to financial institutions, mortgage lenders/brokers, etc., whenever you want to buy or refinance a home, get a loan for a business, or apply for federal aid for higher education.

If you owe tax and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late.

To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know:

  • Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.
  • Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.
  • Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.
  • Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
The late filing penalty can be 10 times higher than the late payment penalty. If you can't pay your tax bill and didn't file an extension, at least file your return as soon as possible! You can always amend it later.

Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.

If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.


If you cannot pay what you owe, you can request an additional 60-120 days to pay your account in full through the Online Payment Agreement application or by calling 800-829-1040; no user fee will be charged. If you need more time to pay, you can request an installment agreement or you may qualify for an offer in compromise.

If you have received a notice, make sure to send your past due return to the location indicated on the notice you received.

By law the IRS may file a substitute return for you if you do not voluntarily file. A series of letters is first sent explaining the possible action IRS may take as part of the Substitute for Return Program.

If you do not file a return or otherwise indicate disagreement such as by requesting to exercise your appeal rights, the IRS will file a basic return for you. An IRS-prepared return will not include any of your additional exemptions or expenses. The IRS will compute the tax liability and send you a bill for the tax that will also include interest and penalties.

If a substitute return has already been filed for you by the IRS, you should still file your own return to claim any additional items. The IRS will generally adjust your account to reflect the corrected figures.

Bottom line, wait no longer and get in touch with your tax professional to ease your efforts and help you find the best solution for your particular financial situation.
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