It happens to everyone at some point – family emergencies, hectic schedules, or just procrastination. Any of these reasons can result in not filing a tax return on time. For those that find themselves in this position, there are options on what to do next to resolve the situation.
First off, file as soon as possible. Late return penalties start accruing, and the less the better. For those that are owed money, then why wait any longer to claim it? A tax return filed up to three years after the tax filing date can still be eligible for the refund owed.
If there is a reasonable cause as to why a taxpayer did not file, for example family emergencies or natural disasters, the late fee could be waved. These people should fill out form 4868 to explain the situation in order to get an extension.
In the situation where a taxpayer is unable to pay the taxes due, it is still in their best interest to file a tax return. This will help the taxpayer avoid any penalties for a late return. There will be late fees for paying later, but it is best not to compound the situation with more penalties. Also, it may be worthwhile to pay any debt to the IRS with a loan or a credit card if the credit will be short-term or if the interest is less overall. With certain credit cards giving points or cash back, this may be the way to go for some taxpayers.
For those that need help with payment plans, the Fresh Start Initiative is a program created by the IRS to help out taxpayers in need. Taxpayers that owe up to $50,000 have the option of stretching out their payments for up to six years. However, interest does accrue during this time period. This initiative also includes the Offer in Compromise program. This allows the taxpayer and the IRS to come to a financial agreement with a total amount due that is less than what the taxpayer owes. However, the IRS will only agree to this program if they believe the taxpayer has legitimate financial need. The IRS examines the income and assets of the taxpayer to determine if they qualify for this particular program.
Prevent this from happening again. The best solution is to prevent the problem: file for an extension before the deadline. This will provide an extra six months to get the return in and will avoid penalties and fees for a late return.
To sum it up, for those owed a refund by the IRS, file as quickly as possible. On the other hand, taxpayers owing money to the IRS should get their taxes done as quickly as possible, but then wait until the due date to file. Why give the IRS money before it is required? This will give taxpayers access to their money for as long as possible, while knowing that their taxes are ready to turn in when needed. While the IRS may be intimidating, they are willing to work with individuals that are willing to work with them.