- There's still time to minimize the damage if you haven't filed your taxes yet.
- If you can't afford to pay, contact the IRS to set up an installment agreement.
- Start planning for next year so you don't make the same mistakes.
The tax deadline has come and gone, so what should you do if you haven't filed yet?
The deadline for filing your 2021 tax return or requesting an extension has come and gone, but the good news is that it hasn't been very long and there's still time to minimize any damage. So, here's a playbook for what you need to do if you missed the tax deadline, as well as steps you can take to make sure it doesn't happen again.
Step 1: Go ahead and file now
First of all, if the IRS owes you a refund, don't be too worried. The tax deadlinetechnically applies to you, but the late filing penalty is based on the amount of money you owe. If you are owed money, there's no penalty the IRS can assess -- but the agency is perfectly content hanging on to your tax refund for as long as you'll let them.
On the other hand, if you owe the IRS money, file your tax return as soon as possible -- even if you can't pay. Here's why. The failure-to-pay penalty is 0.5% of your unpaid balance for every month, or partial month, that you're late. But the failure-to-file penalty is a whopping 5% of your unpaid balance each month. In other words, not filing costs you 10 times as much as paying late.
So, do whatever you need to do to file your tax return now. Track down whatever documentation you're missing, and even if there's something you're still waiting on and you didn't meet the deadline to file an extension, file with the information you have. For example, maybe you made a charitable contribution in 2021 and are waiting for the charity to mail you a copy of the documentation. There's a procedure to file an amended tax return later on.
Step 2: Figure out how to pay
If you owe the IRS money, there are a few options when it comes to paying. You can pay through your checking or savings account electronically or mail the IRS a check. You can also use a credit or debit card to pay through one of the IRS's payment partners, and you can even pay with cash at one of the IRS's retail partners.
If you can't pay right now, another option is to request an installment agreement with the IRS, which allows you to pay a portion of your outstanding tax bill each month for as long as 72 months. This won't stop interest and the late payment penalty from accruing, but it will prevent any other collection activity from the IRS.
Step 3: Plan ahead for next year
As a final thought, one of the smartest things you can do if you missed this year's tax deadline is to set yourself up to make sure it doesn't happen again. Here are just a few tips to help you plan ahead:
- Remember that all taxpayers are entitled to a six-month extension to file (but not to pay), but you have to request an extension by the normal April tax deadline.
- Start gathering the documentation you need as soon as possible. If mid-February rolls around and you're missing something you need to file your return, be proactive and request it.
- If you owe the IRS money this year, consider changing your withholding through your employer's payroll department. If you're self-employed, consider increasing your quarterly estimated tax payments.
This isn't an exhaustive list, but the bottom line is that there's no good reason for not filing your tax return (or requesting an extension) by the tax deadline in April. If you missed this year's tax deadline already, the good news is that you still have time to do damage control, but the sooner you act, the less of a financial sting you'll face.
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