Tax filings for 2016 were due on April 18, 2017. If you did not file in time and did not file an extension you likely met all the elements of the tax crime of willful failure to file a return. This situation is not ideal but it is also not hopeless as the IRS investigates very few taxpayer’s for this crime. The more likely consequence for taxpayers who fail to file are the civil monetary tax penalties. There are ways to minimize the tax penalties. A good tax lawyer can help determine which option makes the most sense for your situation.
Extension for filing taxes
The IRS makes it easy for anyone needing or wanting an extension to receive an additional six months to file. The request must be made by filing Tax Form 4868 and it is automatically granted. However, the form must be filed before the normal filing April deadline.
Even if you file Form 4868 before the April cutoff, you must still estimate and pay taxes by the regular tax day even though tax filing is not due for another six months. Failing to pay the taxes on time can lead to penalties and interest. Also be aware that even though the IRS automatically grants the extension, state agencies may or may not recognize Form 4868 and sometimes require their own form for state tax extensions.
Filing 2016 taxes after the deadline
Even though the normal April 2017 deadline for 2016 has passed, not all is lost for most people. If you file now without having already requested an extension, you may be able to get caught up without penalty – but only if you do not owe.
The IRS tacks on two penalties – one for late filing and one for late payment. The penalty for late filing (5% per month) is steeper than the penalty for late payment (.5% per month) but both are based on the amount owed. Taking too long to pay off the taxes due will also lead to fines on top of the penalty that can cost more than $200. There are certain cases, like when an individual holds foreign investments, where the fines can be must steeper.
That means if you do not owe on your taxes, there may be no penalty. That does not mean you are off the hook for filing though; not filing is a crime. You also run the risk that if you do file late believing you do not owe anything and it turns out you do, you will face the accrued fines and penalties.
Minimizing late tax penalties and fines
The first step to minimizing late tax penalties is to file your tax return as soon as possible. Filing three weeks late is far less detrimental than filing three months late.
Though they are not automatic like the Form 4868 extension would have been, there are some options to halt accruing fines. In some cases, the IRS will waive the penalty based on a reasonable excuse for failure to file. Another option, Form 1127, can allow the taxpayer to pay late, but the criteria are strict so not everyone will have the application approved. In some cases, it makes sense to enter into an offer in compromise with the IRS to settle a tax debt.
Maryland tax lawyers maximize options
Your tax situation is unique. A knowledgeable eye can identify which post-deadline tax filing options would be most beneficial. The Baltimore tax lawyers at Rosenberg Martin Greenberg are adept at identifying tax issues and navigating the IRS tax resolution process.
To learn how we can help you navigate through a late tax filing, call us today.
Additional tax extension resources:
- IRS.gov, Things You Should Know About Filing Late and Paying Penalties, https://www.irs.gov/uac/newsroom/eight-facts-on-late-filing-and-late-payment-penalties
- IRS.gov, Eight Facts on Late Filing and Late Payment Penalties, https://www.irs.gov/uac/newsroom/eight-facts-on-late-filing-and-late-payment-penalties
- IRS.gov, Taxpayer Bill of Rights, https://www.irs.gov/taxpayer-bill-of-rights