Filing taxes is your responsibility when you earn income. If you didn’t file a return last year, there was probably a reason. However, you’ll want to get back on track. Here’s what you can expect when you do file this year.
What if I didn’t file or pay my taxes last year?
What you need to do is file back taxes (also know as a prior year return). TaxSlayer allows you to complete prior year tax returns for up to three years after the return is due.
You’ll report your income and expense information for the year you are filing, so you’ll need to have those records on hand. If you are missing any documents, you can request them from the IRS using Form 4506-T. If you are filing a paper return or filing a return that is more than three years past-due, you’ll need to download those tax forms from the IRS website. For example, if you need to file for 2015, download a Form 1040 for 2015.
All prior year tax returns must be mailed to the IRS office in your state (the address can be found on your state return if you have a state filing requirement). Back tax returns cannot be filed electronically.
You will need to include any payment you owe when you submit your prior year return.
Since you did not file your taxes at all last year, you may have to pay a penalty. In this case, you will receive a notice of penalty and interest fees you will need to pay in addition to your taxes due.
*Note: If you are getting a refund, there is no penalty for late filing. But you must file within three years after the return is due or else you will not be able to collect your refund.
What if I filed my taxes but didn’t pay my tax bill?
If you filed a tax return but you didn’t pay your bill, you will be charged a fee for late payment – usually 0.25% of your tax bill per month that it was late. If you filed before the tax filing deadline, the fee will be lower than if you filed late. But beware of compounding interest on your unpaid tax bills.
To avoid this, you can enroll in an installment plan through the IRS to pay off your tax bill bit by bit. If you owe less than $50,000, this is a great option to tackle your tax bill.
Does the IRS know how much income I earned?
Yes. Every form you received from your employer has also been sent to the IRS. If you are self-reporting, they will still know how much you earned. They can use any of the following methods if they are suspicious that you did not report all your income.
What if I miss the April 15th deadline?
File as soon as possible, even if you miss the original deadline.
If you owe on your tax bill, you will immediately start to accumulate a failure-to-file penalty. This begins at 5% of your tax bill and caps off at 25%. However, if it takes you more than 60 days after April 15th to file, you will be charged an additional fee of $135 or 100% of the taxes you owe, whichever is less.
On the other hand, if you are expecting a refund you won’t be charged any fees. But you must file within 3 years of the original due date to claim your refund. The IRS won’t send you your refund until you file.
What if I am approved for an extension?
If you know you can’t file on time, apply for an extension. That will push back your tax filing deadline to October 15th of that year.
However, you must still pay your tax bill. An extension is only for filing your return, not paying your bill. You must pay at least 90% of your balance by April 15th. The late fees are less but still start at 0.5% of your tax bill. And you’ll still face the same compounding interest.