- Most people have to pay taxes on their income, unless they make less than the standard deduction and meet other IRS requirements
- You may forget to file your taxes on time, because they may be too complicated and you aren’t ready by the deadline, or you may not know you are required to file a return
- Seven steps to take if you forget to file:
- Expect a letter from the IRS
- Pay the Failure to File penalty
- File your tax return
- Apply for a filing extension
- Claim the refund you’re owed
- Apply for a payment plan
- Avoid a substitute for return
Tax time comes around each spring, bringing stress and uncertainty to many. Your daily life can get in the way of filing a tax return or paying taxes on time. Complicated financial situations can also make it hard to have everything ready by the due date.
The deadline may pass without you submitting your tax return. What if your reality is, “I forgot to file my taxes”? It can be a big challenge for businesses and individuals to file and pay on time, leading 19 million taxpayers to request an extension in 2021.
Many taxpayers forget to do it, so you shouldn’t worry too much just yet. Here is your guide to what to do if you forget to file your taxes.
Who Has to File Taxes?
Filing and paying income tax is part of earning money and living in the United States. You must pay taxes on the income you earn and are required to file a tax return with the IRS each year. Some business owners and self-employed individuals must pay quarterly taxes in addition to filing an annual return.
You may not need to file a tax return if you make less money than the standard deduction, which is $12,950 for individuals in 2022. You won’t have to file a return if you make less than the standard deduction, are under age 65, and aren’t subject to special circumstances, like receiving self-employment income. You are required to file if you make more than $400 in self-employment income during the year. You typically won’t have to file a tax return if you only receive Social Security benefits, though there are some exceptions.
There are some cases in which you may not be required to file a tax return but you still should do it to get tax benefits. You will only be able to get a tax refund by filing a tax return, so it’s a good idea to do it if your employer withholds taxes from your paycheck. The IRS won’t automatically send you a refund for what you’re owed.
Failing to file your tax return on time has repercussions. You may have to deal with more costs, such as penalties and accruing interest, on top of what you owe for taxes.
Reasons You May Fail to File Your Taxes
Life can get in the way of obligations like filing your annual tax return. Unfortunately, many people miss the deadline and face the consequences with the IRS. Failing to file, especially over multiple years, can have major impacts on your finances and can even get you into legal trouble. Here are a few common reasons you may not file your taxes on time:
You May Think You Are Exempt from Filing
Income thresholds and other IRS requirements can be complicated and hard to understand, especially for the average worker. Some people may believe that with their modest income, they aren’t required to pay taxes. There are only certain circumstances that aren’t very common in which you wouldn’t have to file.
You Missed the Deadline
Some taxpayers are busy preparing for tax season and they may not have everything ready in time for the April 15 deadline. Accountants are extremely busy in the spring months leading up to tax day, and taxpayers may put off hiring someone until everyone is booked up and can’t fit in their taxes. This is why many people decide to request an extension with the IRS, which gives them more time to gather their records.
You Forgot about Taxes
It can be especially hard for young people to understand their tax obligations. They may completely forget that they have to submit a tax return each year, even if they will be getting a refund. Putting the deadline in your calendar can help you remember to file on time.
Failing to file a tax return can be a big problem, no matter the reason. You don’t want to pay a lot of fees to get out of trouble. You also don’t want the IRS to think that you are deliberately trying to avoid paying taxes, which can lead to legal charges. Contact a tax professional right away who can help you sort out what to do next.
Seven Steps to Take When You Forgot to File Your Taxes
The deadline came and went, and you haven’t filed. You’re thinking to yourself, “Oh no, I forgot to file my taxes.” What should you do next? Follow these seven steps:
1. Expect a Letter from the IRS
The IRS will send a summons in the mail if you haven’t filed your taxes on time and are required to file and pay based on your income situation. The summons is the IRS’s first attempt to collect what is owed.
2. Pay the Failure to File Penalty
Filing your taxes late means you will be subject to the Failure to File Penalty from the IRS. The agency’s website states that this fee is “based on how late you file your tax return and the amount of unpaid tax as of the original payment due date.” The penalty is 5 percent of unpaid taxes for each month or part of a month that the tax return is late. It will not be more than 25 percent of your unpaid taxes. Pay this fee as soon as possible, as it will accrue interest.
3. File Your Tax Return
File your tax return as soon as you realize you have forgotten to file. This is important so that you don’t continue to stack on penalties from the IRS.
4. Apply for a Filing Extension
Sometimes you may need more time to file your return. Try applying for an extension so that you have more time to submit your tax return, but you’ll need to do it by the original tax return filing deadline. If you use the Free File feature from the IRS to ask for an extension, you should receive six months, until October 15 of that year, to file your return. Note that this is not an extension to pay your taxes, just to file your return. You still have to pay the taxes you owe on time to avoid a penalty.
5. Claim the Refund You’re Owed
There isn’t a penalty for failure to file when the IRS owes you a refund, but make sure you don’t allow the statute of limitations to expire before you file to get your refund. You can still claim a refund, even if you fail to file on time. You need to file an original tax return within three years of the due date to get your refund.
6. Apply for a Payment Plan
Applying to set up a payment plan can help you if you are unable to pay your taxes or the penalty by the deadline given to you. This helps you pay off your obligations and avoid additional penalties.
7. Avoid a Substitute for Return
The IRS will, in some situations, file a return for you based on the information they have, whether W-2s or 1099s. This is called a substitute for return. You won’t be able to claim any tax credits or deductions if they do this, and they may not have a complete picture of your income. You will likely have to pay the maximum taxes possible on top of penalties and building interest.
The IRS has strict guidelines to ensure that everyone files a tax return and pays taxes. Forgetting to file your return isn’t the end of the world, but make sure you’re ready to deal with penalties and file your return as soon as you can. Talking to a tax expert will help you understand the consequences of not filing and how to avoid them in the future.
Best Practices for Filing Your Tax Return on Time
Creating a better strategy for managing your taxes will help you remember to file in the future. Follow these best practices for a more effective system:
- Prepare for taxes all year. Taxes shouldn’t just be on your mind once a year. Prepare all year by saving, evaluating your income, comparing your situation to the prior year, and maintaining records you may need.
- Improve your recordkeeping system. Both business owners and individuals should have a method in place for recordkeeping. Receipts, invoices, bills, and other transaction documents should be maintained, especially if you are itemizing your deductions and writing off business expenses. Income should be tracked, as should any taxes paid out of your paychecks throughout the year. This is usually done for you by your employer if you’re a regular W-2 employee. Keeping track this information throughout the year will help you have everything ready when tax time rolls around, which helps you avoid missing the deadline.
- Set reminders for tax time. Put alerts in your calendar to remind you to file your tax return and pay your taxes on time. Remember that using the services of an accountant or accounting service will likely require you to start working with them early in the year.
- Gather personal information you need in advance. Filing your tax return means you need information like your marital and filing status, your Social Security number, current address, and dependent information, all on top of your income and your expenses for the year. Make sure to track any major changes that could impact your taxes, like getting married or divorced, starting a business, or buying a home.
- Enlist the help of a professional. A tax expert is a good idea so you won’t miss a requirement, a tax break, or a deadline. They will make sure that if anything needs to be submitted late, they will file an extension to avoid penalties or issues. They will also help you understand how your tax obligations may change each year.
There are plenty of steps you can take to stay proactive to file your taxes on time. Talk to a tax lawyer who can help you learn how to prepare more effectively and avoid serious repercussions.
Contact the Tax Experts at Silver Tax Group
Forgetting to file your taxes is a common mistake. Unfortunately, there are consequences that come from failing to file or pay on time, including penalties, interest, and additional costs. Failing to pay taxes may eventually lead to legal trouble which can be a huge issue for you or your business.
The team at Silver Tax Group is ready to help you with whatever tax challenge you’re facing. We assist with emergency tax services, audits and audit defense, litigation, criminal tax defense, tax fraud investigations, tax planning, and many more.
Reach out to the Silver Tax Group to speak to a tax expert about what to do when you forget to file your taxes.