Late on Your Taxes? File Now to Prevent Higher Penalties

Updated for 2023:

There’s important news for those who have not filed their 2022 federal income taxes. The IRS is urging taxpayers to file their tax returns and pay taxes owed by June 14, 2023. This gives taxpayers who missed the April 18 deadline a chance to catch up and avoid a larger late-filing penalty. Here’s what you need to know about the filing extension and how it impacts your taxes:

Penalties for Late Filing and Late Payment

The IRS imposes late filing penalties when taxpayers fail to file their tax returns or pay their taxes on time. The failure-to-file penalty is normally 5% of the unpaid tax, capped at 25% per month or part of a month that the return is late. Once you file, this penalty stops accruing. However, if your return is more than 60 days late, the minimum failure-to-file penalty is $435 or 100% of the tax due, whichever number is lower.

In addition to the failure-to-file penalty, the IRS also charges a failure-to-pay penalty, which is 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid. Like the failure-to-file penalty, the failure-to-pay penalty cannot exceed 25% of your tax due.

Combined Penalties

If both penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. This results in a combined penalty of 5% for each month or part of a month that your return was late. For instance, if you were subject to a 5% failure-to-file penalty and a 0.5% failure-to-pay penalty, the IRS would apply a 4.5% failure-to-file penalty and a 0.5% failure-to-pay penalty.

Payment Options

Even if you can’t pay the full amount you owe, you should still file your income tax return as soon as possible. Doing so can reduce late filing penalties. You can also consider applying for an IRS payment plan. They provide short-term plans (180 days to pay in full) and long-term plans (up to 72 months) based on your tax type and the amount owed. Certain payment plans can be set up online without the need to contact the IRS.

Penalty Abatement and Special Circumstances

Taxpayers who have a valid reason for not filing on time may qualify for penalty relief. First-time abatement is available for those who have filed and paid on time without any penalties for the past three years. This allows taxpayers to request a reduction or waiver of penalties. However, interest charges are not eligible for abatement under this program. Special filing deadlines apply to individuals residing outside the US, those serving in the military abroad, and taxpayers in federally declared disaster areas.

Extensions and Online Resources

Taxpayers who filed a tax extension will have until October to file their returns. It’s important to note that any tax owed for the 2022 tax year was still due by April 18, 2023. To get more information about your tax situation, you can access your federal income tax account online through the IRS website. This allows you to review your tax records, make or view payments, and set up payment plans.

Take advantage of the extended deadline to file your 2022 taxes and avoid additional penalties. Filing as soon as possible and paying what you can will help minimize potential penalties.

Filing electronically is the fastest way to get your taxes to the IRS. With TaxAct, you can e-file your taxes quickly and securely.

This article is for informational purposes only and not legal or financial advice.