Did you forget to file last year’s taxes? And what do you have to say about the last ten taxable years?
You might just forget about last year’s taxes.
It is understandable, 2020 have been a rough year.
So, let’s answer the question that motivates us to write this article: How long can I take to file taxes?
The short answer is never. You can file your taxes late, but you should know that it will not be the same as if you filed them on time.
There is no time limit for collecting taxes
That’s right, there is no time limit for IRS tax collection.
Don’t think the IRS won’t realize you didn’t pay in the last year or the last decade.
They will simply make a substitute return for you, but as practical as it may sound, you are not going to want this.
This year you had more time to file your taxes.
As a result of the pandemic, the 2020 tax deadline was July 15.
It may be understandable that you did not file due to the difficulties caused by the pandemic, but eventually you will have to file your taxes.
And better late than never.
The IRS offers a very useful tool, but you need to use it before the tax deadline.
It’s called a tax extension.
If you know you won’t be able to file until the deadline, be sure to file an extension.
By doing so, you will have an extra six months to get everything in order.
Important: You are the one who must request the extension.
The IRS will not give it to you automatically, only in certain very limited circumstances:
- If you are an American citizen or resident and you live or work outside the country during the tax filing deadline. You will then have a little more time to declare and pay without requesting an extension. But don’t trust yourself, you will barely have two extra months.
- If you are affected by a natural disaster, you could get more time to file and pay. The IRS maintains a list of disasters that qualify to an extension. The time of it varies.
- If you are a member of the military, then you could get an automatic extension, depending on your current duties. In some situations, you could get more than six months.
If you know that you won’t be able to file until midnight on the tax day, or that you can’t pay your taxes that day, make an effort to request an extension.
You will have a little more time and you will eliminate the penalty for not filing on time.
If you have not yet filed your tax return, you can be fined a penalty for not filing on time. This penalty will cost you 5% of the tax owed each month.
This penalty has a limit (25% of unpaid taxes) at least if you pay during the first 60 days after the deadline.
Then, the minimum penalty will be 135% or 100% of the unpaid taxes (the lower ammount).
It may seem like a not very severe penalty, but remember that it is added to your original debt.
But, remember that to the penalties for not declaring and for not paying, you must add interest.
And these interests do not disappear with the extension.
Filing missing returns
Just as the IRS does not have time limits for collecting your debts, you also do not have a deadline to file your back filings.
However, if you have a pending refund, you have three years to enjoy it.
Additionally, there are other benefits of filing missing returns:
- Protect your Social Security benefits if you are self-employed.
- It makes it easy to obtain loans, which can be denied or delayed if you cannot file statements that prove your income.
- You will sleep better because you don’t have to worry about your taxes.
If you didn’t know, you can be charged with a crime if you don’t file your taxes.
The IRS has a few fees to choose from, all related to tax evasion.
You could face up to 5 years in prison and up to $ 250,000 in fines.
Sure, the IRS only has 6 years to take you to court, but, you really don’t want to risk it.
What if I can’t pay?
The IRS is pretty ruthless, but they also understand life circumstances and know that not everyone can pay their taxes in full or on time.
But, they will appreciate if you deal with the matter early.
Obviously, if you haven’t declared in years, you’ll lose the benefit of the doubt a bit.
If you cannot pay your taxes, plus penalties, plus interest, you will be interested in applying to an IRS payment plan.
They have several options to choose from, with different time limits.
If you cannot pay the full amount of taxes due, you can negotiate a lower payment.
An offer in compromise can help you negotiate a lower amount of taxes.
However, take it as a last resort, since they are usually expensive, especially if you are already with water up to your neck. Also, the IRS may not accept your offer.
It is understandable that you cannot file taxes on time
If you are a US citizen or resident, you must file and pay your income taxes. It is what is expected of you.
However, sometimes adversities happen and you can’t do it. It is understandable.
Our advice is that you take care of this as soon as possible, thus minimizing penalties and interest.
If you need help, contact the Global Tax team.
We have more than 25 years helping other citizens with tax problems similar to yours.