Take action if you missed the deadline
If you missed the filing deadline and owe the IRS, file as soon as possible. Some people tend to procrastinate further once they have missed the filing deadline. Procrastinating can cause you to pay more penalties and interest.
The Failure to File Penalty is 5% of the amount of unpaid taxes for each month or part of a month that a tax return is late. The maximum late penalty is 25% of your unpaid taxes.
Don’t panic if you don’t owe the IRS. There is no late filing penalty if you are due a refund or don’t owe anything. The reason for this is simple. For example, suppose you are a month late, the late penalty is 5%. However, 5% of zero is zero.
Suppose both a Failure to File and a Failure to Pay Penalty are applied by the IRS in the same month. In that case, the Failure to File Penalty will be reduced by the amount of the Failure to Pay Penalty for that month, for a combined penalty of 5% for each month or part of a month that your return was late.
If you are more than 5 months late and still haven’t paid, the Failure to File Penalty will max out. Still, the Failure to Pay Penalty will continue until the tax is paid, up to its maximum of 25% of the unpaid tax as of the due date.
Suppose your return was over 60 days late. In that case, the minimum Failure to File Penalty is $435 (for tax returns required to be filed in 2020, 2021, and 2022) or 100% of the unpaid tax, whichever is less.
You should request First Time Abate for a penalty if you have been and are currently compliant with the IRS.
You are considered to be compliant by the IRS if you:
Filed the same return type, if required, for the last three tax years before the tax year you received the Penalty.
Didn’t receive any penalties during the prior three years, or any penalty was removed for an acceptable reason other than First Time Abate.
You can request the First Time Abate for the penalty even if you haven’t fully paid the tax liability. However, the Failure to Pay Penalty will accrue until you pay the tax in full.
You can call the toll-free number at the top right corner of your IRS letter to request the First Time Abatement. You don’t need to provide supporting documentation when requesting relief. The IRS will review your information and see if you meet the First Time Abatement requirements.
You can also request reasonable relief for circumstances beyond your control. The events include filing late due to a death, serious illness, fire, casualty, or natural disaster.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at firstname.lastname@example.org.