It may seem like you’ve got all the time in the world to file your taxes, and that’s the problem; you don’t. If you tend to put off filing your return until the last minute, you’re certainly not alone. It is worth considering, though, what can happen if you wait too long to file…and how that can lead to serious trouble.
Maybe you’ve waited so long you need an extension. Will this make your situation better or worse? While you might have a very good reason for needing more time to get that return in, there is an excellent chance that you can make the April 15th deadline if you try. However, let’s say that you need the extension. Think about what can and will happen after making such a request.
The IRS makes filing an extension painfully easy, as it turns out. In most cases, you’ll simply need to complete and submit Form 4868, which is conveniently located on IRS.gov. It’s free for you to submit your request and, in all likelihood, you’ll be approved to have your return in by October 15th. But, is it truly “free”?
Consider what it actually costs you, or could cost you. First, filing an extension does not grant you more time to pay your taxes. You might think that this isn’t a really a problem, particularly if you don’t usually have to pay in. But remember, you haven’t prepared your return yet, so you don’t know. If it turns out that you do owe this year, you’ll be held liable for penalties and interest for failing to pay your taxes by the deadline. Whether or not you have a tax liability, you still have to file your return by the end of your six-month extension. If you don’t, things will get worse.
If you don’t meet the October 15th deadline and the IRS doesn’t hear from you, they may file a return for you. This is called a Substitute for Return (SFR), but it’s not much of a substitute. The IRS will include income information reported by third parties, such as your employer. However, you might have deductions that you were eligible for or dependents you could have claimed on your return. The SFR won’t include any of this, though, and you could end up owing when you might not have if you’d filed. Once the IRS assess what they determine you owe, you will be held responsible for penalties and interest that have been accruing since April 15th – and the clock just keeps running on these charges.
Your balance will continue to grow monthly, eventually swelling what might have been a couple of hundred dollars into a couple of thousand. The longer you wait to pay, the more it will cost you. Now, think back to the beginning of the year, when you thought time was on your side. Having too much time can be dangerous, intoxicating, even. Just remember that things can go horribly wrong in six short months, especially when you’re talking about your taxes.
You don’t have to wait until you have a major financial deficit to seek assistance with a tax resolution. If you have unfiled years or back taxes, contact a licensed professional. He or she can quickly correct your IRS issue and will make suggestions on what to do differently in the future. If you think you may be in trouble, all you have to do is pick up the phone. Just don’t wait to make the call.