If you missed the April 18 tax deadline, you may cut back on penalties by filing your return promptly, according to the IRS.
While it’s too late to request an extension, you can still reduce monthly late fees. Failure to file costs 5% of unpaid taxes per month and late payments incur 0.5%, both capped at 25%.
But you may qualify for one-time penalty relief with a history of on-time filings and payments, said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
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To be eligible, you can’t have late filings or penalties from the three prior tax years, and you must be current on all returns and balances, or have an IRS arrangement to cover unpaid taxes.
There’s no penalty if you’re getting a refund, said Sergio Garcia, a CFP and managing director of financial planning at BFS Advisory Group in Dallas. But the longer it takes to file, the more time you’ll wait for your payment.
You can still send your return through the IRS Free File service if your adjusted gross income is $73,000 or less for 2021, which applies to roughly 70% of taxpayers, or Free Fillable Forms until Oct. 20, if your AGI exceeds $73,000.
Most states also require an income tax return, but several places have a due date past the federal deadline. For information, you can find your state’s tax website here.
Although the federal tax deadline was April 18 for most Americans, some filers automatically have more time, including certain disaster victims, those serving in combat zones or U.S. citizens and resident aliens living abroad.
“In some cases, the extension period could be anywhere from an automatic two-month extension to as long as an additional 180 days to file,” said Jim Guarino, a Woburn, Massachusetts-based CFP and CPA at Baker Newman Noyes.
Even if you’re not required to file, it still may be beneficial to send a return, he said. It’s the only way to collect a refund or refundable tax credits, such as the earned income tax credit or child tax credit.
If you can’t pay your bill
If you’re unable to cover your tax bill, you may have options, such as a long-term payment plan through the IRS known as an installment agreement. But you must be up to date on all returns, and can’t owe more than $50,000 including tax, penalties and interest.
Other options may include an offer in compromise for taxpayers with financial difficulties, allowing you to settle with the IRS for less than you owe, or “currently not collectible” status, where the agency temporarily stops trying to collect. But you must meet specific criteria for each one to qualify.
