Tax Day, or the deadline for filing your 2022 federal income tax return, falls on April 18, 2023. But what happens if you are late filing taxes?
Can You File for an Extension?
If you think there’s a chance that you might miss the tax-filing deadline, you should file for a deadline extension. This will automatically give you until October 16, 2023, to file your taxes. However, you must file an extension before April 18. If you wait until after this date, it will be too late to receive an extension.
To file for an extension, complete IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
Note that while filing for an extension will give you more time to file your federal tax return, it does not give you more time to pay your taxes if payments are due. If you think you might owe taxes this year instead of receiving a refund, you should estimate how much you’ll owe and send this amount in with Form 4868.
Read More: How to File for a Tax Extension
What Happens if You Don’t File Taxes on Time?
If you miss the tax-filing deadline and are due a tax refund this year, then there will be no penalty associated with filing late — even if you don’t file for an extension. Your only “penalty” would be a delay in receiving your refund. You have up to three years from the tax-filing deadline to file your return and receive your refund.
But it’s a different story if you owe taxes and miss the tax-filing deadline. In this scenario, you will be assessed penalties for failing to file your return on time and failing to pay your taxes on time. If a return is over 60 days late, the minimum penalty for failure to file penalty is 5% of the unpaid tax per month or part of a month, plus interest, with a maximum penalty of 25% of the unpaid tax.
The penalty for filing taxes late is 0.5% per month (or a fraction thereof) of the unpaid tax until the tax is paid in full, plus interest, also with a maximum penalty of 25%. The IRS can collect back taxes for ten years from the date the taxes were assessed.
Why You Should File a Past-Due Tax Return ASAP
If you were supposed to file a tax return but didn’t do so, you should go ahead and file this return as soon as possible instead of waiting. Here are the top reasons for doing so:
1. To claim your tax refund.
If you are owed a refund, you won’t receive it until you file the tax return corresponding to the tax year the refund is owed.
The IRS holds onto tax refunds if its records show that one or more returns is past due until it receives the return or an acceptable excuse for why the return won’t be filed.
2. To protect your Social Security benefits.
This applies mainly to self-employed individuals. If you’re self-employed and don’t file a tax return, your self-employment income won’t be reported to the IRS. This means you won’t receive credits for this income toward your Social Security retirement and disability benefits.
3. To avoid penalties and interest.
The penalty for failing to file a tax return is 5% of the unpaid tax per month, plus interest, with a maximum penalty of 25% of the unpaid tax. And the penalty for filing a tax return late is 0.5% per month (or a fraction thereof) of the unpaid tax until the tax is paid in full, plus interest, also with a maximum penalty of 25%.
4. To avoid loan approval delays.
When you apply for a home mortgage, business loan or federal higher education aid, you will have to submit a copy of your income tax return along with your loan application. So failing to file a return could delay your loan approval.
What If You Can’t Pay?
You have three main options if you can’t afford to pay the amount of tax you owe now:
1. Pay it using a credit card.
The IRS accepts credit cards as payment for taxes due. Keep in mind, however, that if you can’t pay your credit card balance in full when the bill’s due date comes, you could end up paying high interest rates that significantly increase the amount that you end up paying.
2. Pay it in installments.
You’ll attach IRS Form 9465 to your tax return to request an installment agreement and monthly payment plan for the payment of your taxes. If you owe more than $10,000, the IRS may want to review your personal finances (such as your assets, liabilities and cash flow) before agreeing to a payment plan.
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The IRS will charge $31 to set up the payment plan if payments are direct debited, or $149 for non-direct debit payments. The interest rate charged on late payments is currently 3% (this changes quarterly) and there’s also a late payment penalty of 0.5% per month.
3. Ask for an “offer in compromise.”
In certain situations, the IRS will accept less than the full amount of tax due. This is referred to as an offer in compromise. These situations include:
if there’s doubt that the amount due is accurate
if there’s doubt that the tax could ever be paid in full
if the IRS determines that payment would result in economic hardship or be unfair
Request the Form 656: Offer in Compromise Package to learn more about offers in compromise.
What If You Didn’t Ask for an Extension?
If you don’t file your tax return on time and don’t ask for an extension, the consequences will depend on whether you’re getting a refund or owe money to the IRS. If you’re getting a refund, there are no consequences to filing your federal return late and not asking for an extension (the same might not be true for state taxes).
But if you owe the IRS money and don’t ask for an extension, you will be subject to a late filing penalty of 5% of the unpaid tax per month, plus interest, up to a maximum of 25%.
And remember that if you fail to file a tax return indefinitely, there is no statute of limitations on how far back the IRS can go to collect past-due taxes.
What Are the 2022 Tax Brackets?
Here are the federal income tax brackets for tax year 2022 that apply to tax returns filed in 2023.
Tax rate
Single filers
Married filing jointly
Married filing separately
Head of household
10%
Up to $10,275
Up to $20,550
Up to $10,275
Up to $14,650
12%
$10,276 to $41,775
$20,551 to $83,550
$10,276 to $41,775
$14,651 to $55,900
22%
$41,776 to $89,075
$83,551 to $178,150
$41,776 to $89,075
$55,901 to $89,050
24%
$89,076 to $170,050
$178,151 to $340,100
$89,076 to $170,050
$89,051 to $170,050
32%
$170,051 to $215,950
$340,101 to $431,900
$170,051 to $215,950
$170,051 to $215,950
35%
$215,951 to $539,900
$431,901 to $647,850
$215,951 to $323,925
$215,951 to $539,900
37%
Over $539,900
Over $647,850
Over $332,925
Over $539,900
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