Failure to File Penalty
If you’ve been slapped with a Failure to File penalty, there are ways to avoid the maximum penalty. Request an extension, ask for penalty relief, or create a payment plan with the IRS.
Generally, a failure to pay penalty is ten times smaller than a failure to file penalty, so it’s cheaper to file even if you don’t have the funds.
If you can’t pay your taxes in full, the IRS can work with you to help resolve your unpaid taxes with a payment plan. Most people can set up an IRS installment agreement using the Online Payment Agreement tool on IRS.gov. Learn more about installment agreements, or consult a Community Tax professional for free to find the best way for you to pay off your financial obligations.
How Your Tax Status Affects a Failure to File Penalty
Married or Joint Tax Returns
With a late return, both parties will be legally responsible for the failure to file penalty, which is added to any other unpaid taxes and ultimately could impact your access to payment plans. Alternatively, if your spouse is late filing taxes separately, you won’t be held accountable for their failure to file penalty. Learn more about married tax filing and figure out which option is best for you.
Student Tax Returns
Students who do not owe the IRS anything won’t receive any IRS penalties for filing their taxes late. If a student’s income exceeds the limit, and they are filing taxes late, they will likely incur a penalty. Learn more about filing as a student, as well as potential tax credit for student taxpayers.
How to Handle Late Tax Returns?
If you are due a refund from the government, there is no penalty for not filing taxes. Keep in mind, though, if you don’t file a tax return within three years, you forfeit all refunds and/or credits owed to you.
However, if you do owe the government money and forget to file, there can be significant penalties and interest.
- The penalty for failing to file is worse than the late payment penalty.
- The maximum penalty rate is 25 percent of your unpaid tax bill on your late return.
- Failure to file a tax return on time will result in a late-filing penalty equal to 5 percent of the taxes you owe for each month, or partial month, you’re late for up to five months.
- If you are more than 60 days late filing your return, your minimum late-filing penalty is the smaller of $135 or 100 percent of your unpaid balance — plus you still have to pay the taxes.
If you were late filing your taxes, the first thing you should do immediately is file for a tax extension of time. The IRS will give an automatic six month extension to file your return, but you have to ask. If you owe money on your taxes, you’ll still need to pay your tax liability by the due date or risk interest charges, but at least you won’t receive a penalty for filing taxes late. Community Tax preparation experts can help you file for an extension, or pay off your back taxes.
How to Request Penalty Relief?
If you were already hit with a failure to file penalty, and have a good reason for late filing, you can write an abatement letter to the IRS to ask for penalty relief. The IRS might waive penalties for reasonable causes such as death, serious illness, natural disasters, or other serious medical conditions. This applies to both the individual taxpayer and their family members. The IRS will typically look at four factors when considering penalty abatement:
- The taxpayer should have a reasonable and compelling reason for seeking penalty abatement, and the dates and circumstances on which the penalties were based should sync with the given explanation.
- The compliance history of the taxpayer should demonstrate good behavior.
- The length of time that it took the taxpayer to become compliant in this circumstance must be reasonable given their situation.
- The circumstances cited as the underlying reason for tax penalty abatement must be out of the taxpayer’s control.
What Our Clients Say
Jay K.
I have been working with Daniel U. to file 5 years of tax returns and resolve any disputes there may be. His service delivery has been professional, responsive, and accurate, and I look forward to working with him through the final stages of this process.
Charles K.
I came to community tax with 6 years of unfilled tax returns. Terri P. W. navigated the whole way. You can’t beat service and results. It must feel like this when you hit the lottery. Thank you all for your hard work.
What Our Clients Say
Jay K.
I have been working with Daniel U. to file 5 years of tax returns and resolve any disputes there may be. His service delivery has been professional, responsive, and accurate, and I look forward to working with him through the final stages of this process.
Charles K.
I came to community tax with 6 years of unfilled tax returns. Terri P. W. navigated the whole way. You can’t beat service and results. It must feel like this when you hit the lottery. Thank you all for your hard work.
How to Get Help with a Failure to File Penalty?
There’s nothing wrong with asking for due sympathy from the IRS when referring to your failure to file a tax return. However, if you don’t have a reasonable explanation for filing taxes late, it’s important to file back taxes. Besides squaring up with the federal government, getting up to date on your taxes has a few other benefits. You’ll get access to loans and aid which require copies of tax return for application. Furthermore, if you file your tax return, it will act as an investment in any future payments you might be entitled to through social security, disability, unemployment, or Medicare.
The IRS has a six year statute of limitations to audit you from the time you last filed.
The best way to get ahead and avoid IRS penalties and interest associated with late filing is to have professional tax preparation assistance. Use Community Tax for help with your taxes and to clear your failure to file penalty or avoid it altogether.
