Missed the Extension Deadline, What’s Next?
The tax extension deadline of October 15, 2020, has come and gone. If you did not file or pay your taxes by the 15th, you are now susceptible to late fees and other penalties.
Thankfully, you are not out of options – you can still take action to minimize the effects of late penalties.
What Happens if You Miss the October Extension Deadline?
The worse thing a delinquent taxpayer can do is nothing. Should you choose to forget about your unfiled and unpaid taxes or push them off till later, the fees and penalties will only get more intense.
More Interest
A quick point of clarification about the extension deadline; the extension does not give you more time to pay taxes – it only gives you more time to file your tax return.
If your tax bill is already outstanding, you will accrue more interest.
Increased Late-Payment Penalty
A late-payment penalty starts after the April deadline. The fee is 0.5% per month that your outstanding tax debt is unpaid. After the extension deadline, the penalty amount will increase (if it hasn’t already), capping at 25%.
Late-Filing Penalty
Unlike the late-payment penalty, the late-filing penalty fee starts at 5% of the amount due. Each month that your tax return is late, you are charged 5% of your outstanding tax debt, maxing out at 25%.
What to do if You Miss the Deadline?
If you miss the tax extension deadline, you still have options in the form of the Fresh Start Program, which offers various programs to taxpayers who can successfully prove their inability to repay their current tax bills.
Arrange an Installment Agreement
An installment agreement is an arrangement between the taxpayer and the IRS, where the taxpayer is allowed to pay an agreed-upon monthly payment each month toward their tax balance.
Apply for a Penalty Abetment
The IRS can eliminate or reduce a penalty for a reasonable cause if you request it. The term the IRS uses for wiping out a penalty is called an abatement.
Qualify for an Offer in Compromise
An offer in compromise is an agreement between the taxpayers and the IRS that allows a tax bill to be settled for an agreed-upon amount.
Contact TaxRise For Assistance
You don’t have to take on the IRS alone. Research has found that taxpayers are more likely to get a favorable outcome with the IRS if they have a tax expert on their side.
Contact TaxRise today for a free tax consultation.
Any new or systemic Liens and/or Levies will also be suspended for the time being.
For taxpayers who are considered “seriously delinquent”, the IRS will suspend any new certifications for the remaining period. Any taxpayer who falls into this category in reminded and encouraged to enter into an Installment Agreement or apply for an Offer In Compromise.
The IRS will not forward any new delinquent accounts to private collection agencies at this time.
Taxpayers have until July 15, 2020 to verify to the IRS they are qualify for the Earned Income Tax Credit or to confirm their income. If the taxpayer is unable to verify their credentials or provide appropriate documents for this credit, they are encouraged to notify the IRS before the deadline. No cases will be denied this credit for failure to provide requested information until July 15.
Case workers will continue business as usual. However, most case work will be conducted remotely (video/over the phone conferences). Any requests for documentation sent by the Office of Appeals should be responded to in a timely manner to ensure a smooth process.
The IRS will continue to take the appropriate measures to stay compliant and protect the applicable statutes of limitations. In situations where certain statutes may be compromised, taxpayers are encouraged to extend such statutes. Otherwise, Notices of Deficiency will be issued by the IRS and similar actions will be pursued to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.
Practitioners are reminded that PPS wait times may be significantly longer, depending on staffing levels and allocations going forward. The IRS will continue to monitor this as situations develop.
“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”
Learn how easy it is to qualify for tax savings.
