Tax season lasts a long time, starting in January and running until your tax returns are due in mid-April. That may seem like plenty of time to get everything ready to prepare your tax return on time. But there are a host of things that can go wrong with that scenario, and every year, millions of people are late filing their tax returns.
Fortunately, as long as you know what to do, the danger of being late with filing your tax return doesn't have to result in a huge mess. In fact, the Internal Revenue Service is extremely lenient in giving taxpayers extra time to get their tax returns filed -- and you don't even have to have a particularly good reason. What you do need to do, though, is to take the necessary steps to ask for help when you need it. Ideally, if you're aware beforehand what you need to do in order to get your tax return prepared, you won't be in a position in which you have to worry about being late filing your return in the first place.
When it comes to filing taxes late, there are eight key questions many people have. Below, we'll give you the answers to those questions, along with some helpful tips for avoiding the problems that can arise if you get yourself in a bind with your tax-return preparation.
Why do people file their taxes late?
At first glance, there might not seem to be any good excuses for filing your taxes late. After all, most taxpayers know quite well when their tax returns are due, and the timeline typically gives you several months to gather all of the necessary documents and then do the work to prepare your returns.
However, that doesn't stop millions of taxpayers from missing the tax filing deadline. Here are some of the most common reasons people file their taxes late:
Not knowing the tax filing deadline. Even though April 15 is pretty well engrained in the minds of Americans as being the due date for taxes, it can be easy to get confused because of the exceptions that can apply to that deadline from year to year. Specifically, because the deadline isn't always exactly on April 15, you can get lulled into a false sense of security and mistakenly think you might have an extra day or two that you in fact don't have.
Not receiving vital tax information you need to complete your returns. In order to put the right numbers on your return, most taxpayers need to get information from key forms that are provided by employers, financial institutions, and other relevant authorities. If you never get a form that you expected to get -- or if it comes late enough to put you in a bind to get your returns done -- then a late filing can result.
Problems with delivery. Electronic filing should give you an acknowledgment of receipt very quickly, and if you file a paper return, then you're deemed to have filed your return on the date the envelope in which you enclosed the tax return was postmarked. However, if your filing never gets to the IRS for some reason, then you'll be deemed to have filed late unless you can document that you sent the return by the appropriate deadline -- such as by using the certified mail option from the U.S. Postal Service to provide proof of timely mailing.
Mistakenly thinking that you don't actually need to file a return. There are rules under which people who have income that's less than certain minimum threshold amounts aren't required to file a tax return. However, those rules can be tricky to understand, and there are also situations in which even though you might not be required to file a return, it's still smart to do so in order to collect a refund or get some other tax benefit.
Mistakenly believing that not filing will help you avoid trouble with not paying your taxes. If you can't afford to pay your taxes, then it's tempting not to file at all and hope that the IRS doesn't catch on. Unfortunately, the IRS receives tax information from employers, financial institutions, and other sources of income, and if you don't file a return that matches up with that third-party information, then the odds are very good that you'll get audited.
Laziness, forgetfulness, or misimpressions about the rules governing tax returns. It's easy to procrastinate on getting started with tax preparation, and by the time you realize that you're running out of days to get your returns completed, it's sometimes too late to get everything done correctly.
An inability to get help in preparing your tax returns. There are sources of information to help you get your returns filed, including IRS employees and programs like Volunteer Income Tax Assistance. Nevertheless, if you can't get through on busy customer service lines, then it's easy to feel too frustrated to get your returns done correctly and timely.
Natural disasters or other tragedies strike at particularly inopportune moments during tax season. There have been many situations in which a winter storm, wildfire, or other calamity has led the federal government to offer later tax deadlines to those affected. It's important to check with the IRS to see if there's an officially recognized situation that affects you, but if there is, it can buy you some extra time.
Regardless of the reason for filing your taxes late, you'll eventually need to face the consequences. Below, we'll go into more detail about the facts of late filing and what happens next.
When is my tax filing officially late?
Every year, the IRS sets the tax-filing deadline. For most personal returns, the official due date is April 15, unless that day falls on a weekend or holiday. If it does, then the due date for your tax returns moves to the next available day. So, for instance, if April 15 falls on a weekend or a holiday, but April 16 is a regular weekday, then the tax deadline for that year will be April 16.
Where things get confusing is when there are multiple weekend days and holidays to take into consideration in coming up with the final tax deadline. The most common issue arises with the District of Columbia's Emancipation Day holiday, which occurs annually on April 16. Because the IRS is located in the District of Columbia, D.C. holidays are recognized in the same way as a national holiday. So, if April 15 is a Sunday, and Emancipation Day happens to fall on a Monday, then the tax filing deadline for that year will probably be April 17.
In addition, there are some holidays that only affect people in certain areas. The most common issue affecting taxes is the Patriots Day holiday, which is celebrated in Massachusetts and Maine on the third Monday of April. That can give taxpayers in those states an extra day to file, but it's important to understand that taxpayers elsewhere do not have extra time before their tax return will be considered late.
What penalties are involved with late filing?
The IRS imposes a penalty if you file your return late. That penalty is based on the amount of taxes you owe on the return you should have filed. For each month or part of a month that you're late, you'll owe 5% of the amount of tax due. The penalty for late filing maxes out at 25%, meaning that if you're more than four months late filing your return, you'll owe the maximum.
The interesting thing about the late filing penalty is that because it's calculated based on the amount of tax you owe, there's technically no penalty if you don't actually owe tax or would be due a refund. Nevertheless, the IRS can still take action to get you to file a return. And as a matter of common sense, if filing a return will get you a refund, you should do so. If you go more than three years past the original April due date for a particular tax return, the IRS won't let you claim a refund by filing late. So if you're owed a refund, it's important to get the return in before that three-year deadline.
One other thing to keep in mind is that if your return is more than 60 days late, a potentially higher penalty becomes due. The minimum penalty in that case becomes the lesser of 100% of the tax that you failed to pay or $205. Again, this doesn't result in a penalty if you don't owe tax, but it's still an important consideration to keep in mind.
How can I get my tax returns prepared on time?
The best way to get your tax returns prepared on time is to plan out a complete schedule that breaks down the process into steps. For instance, here's a short version of a timeline you could use to file a return by mid-April:
Expect to get your Form W-2 tax form from your employer by the end of January. You should also get any statements showing interest income from a bank or other financial institution by around the same time.
Tax forms reflecting income from brokerage accounts should get to you by mid-February. If you have more complex investments, such as partnerships that report income on Form K-1, then you might have to wait until mid-March or later to get the necessary tax information to file your return.
Make sure you get the tax return forms as soon as they're available. Tax season typically begins in late January, and forms are available online for printing or via tax software as soon as the companies that make popular software packages make that year's version available to users.
Give yourself reasonable intermediate deadlines to get key parts of your return done. For instance, you might dedicate one week to dealing with your investment income, another week to collecting and calculating deductions, and a third week to prepare the main part of your return.
If you anticipate needing help, call early to schedule an appointment. Times in late March and early April fill up quickly, so if you want to have someone on call to help you, don't wait until the last minute to seek their assistance.
What if I don't have all of the tax forms I need to do my return?
It's not unusual for someone responsible for getting you a vital tax document to be negligent in getting that form to you. The problem with preparing your return without that information is that it's likely to result in your filing an incorrect return, and that will leave you with the unappetizing requirement of having to file an amended return with the corrected information.
The smarter thing to do is to be aware of the deadlines for getting your tax forms and then to promptly contact your employer or financial institution if they don't get the forms to you on time. That way, once they correct the problem, you should still have plenty of time to get your returns prepared and filed.
If I know I'm going to be late, what should I do?
Sometimes, despite your best efforts, you don't have any choice -- you just need extra time. That's OK! The IRS has made it easy to solve the problem: Just file for an extension.
Many taxpayers don't understand just how easy it is to get an automatic extension of time to file their returns. You don't have to provide a reason at all in order to get an extension, let alone a good one. All you need to do is file the appropriate IRS form, Form 4868.
However, there's one important thing to know about extensions: You have to request the extension by the deadline for filing. If you wait until after the tax filing deadline to request the extension, it will be too late.
How much extra time can I get with an extension?
An automatic extension gives you six extra months to file your return. Technically, the extended deadline is Oct. 15, with the same rules applying to give you an extra day or two if the original Oct. 15 deadline falls on a weekend or holiday.
An extension only gives you extra time to file your tax return. It does not give you any extra time to pay the tax that's due. You'll notice on the extension form that there is a space for you to indicate how much tax you expect to owe, and you're expected to pay that tax along with your extension request. Fail to do so, and you'll owe a smaller penalty for failing to pay your taxes on time -- even though you'll avoid late filing penalty because of the extension. At just 0.5% for each month or part of a month that you're late in paying your taxes, the penalty is a lot cheaper than the 5% amount you'll owe for a late filing.
What if I need even more time?
The IRS is generous enough to give everyone up to six extra months to file their returns, but the downside is that beyond that point, it's difficult to get further extensions. There are only a couple of situations in which additional time is available:
- If you're outside of the U.S., you can file a discretionary extension request to get up to two months of additional time to file your return beyond the October deadline. That puts your new deadline in mid-December. In order to request the extension, you need to send a letter to the IRS that explains why you can't meet the October filing deadline. Unlike the automatic six-month extension, the IRS is under no obligation to approve your two-month extension request, so if your reason isn't good enough, you might get denied.
- Members of the military who serve in a combat zone can qualify for automatic extensions of time to file returns. In general, you'll have at least 180 days after you leave the designated combat zone in order to file your tax return. In addition, if you're injured and hospitalized as a result of your service in a combat zone or similar area, then you can also qualify for additional time.
Make the right move with your tax returns
With months to get your tax return prepared on time, there's little reason you'll ever need to be late. But if circumstances beyond your control put you into crunch time, the easiest way to avoid being late with your tax filing is to request an automatic extension. That way, you'll get the extra time you need to get everything done right, and as long as you're smart about complying with all of the rules involved in getting an extension, the process will be as painless as possible.