We will be the first to admit that taxes were a curve ball this year. Between the tax deadline delay, multiple stimulus checks, quarantines, closures of CPA offices, new tax rules, unemployment checks, PPP loans and so many of those who either lost their job or saw a sharp decrease in income, it has not been easy! CPAs across the country were scrambling to account of all of these factors while ensuring all of their personal clients and business clients had their taxes in on time and were correctly filed to get maximum returns. But now that the craziness is almost over, there are some of you who have yet to file and are now in the pickle of facing late fees and past-deadline issues with your tax return. Not to worry though, we are here to explain things to avoid and what steps to take next to avoid the majority of the issues you are likely to face. Here's what you need to know.
Already missed the deadline? What's a few more weeks or months or why not wait until next year? Avoid procrastination at all costs. We implore those of you who are late, to not exacerbate the issue with more delays. Get it done immediately. The interest and late fees will compound the longer you wait. If they are done quickly and it is a first time offense, they can possibly be forgiven or at least become manageable. Either file them yourself or call the experts to assist you. We will explain why in the next section, but experts can potentially help get fees waived.
There is a critical difference between the fees incurred from late filing and the fees associated with late payments. Late filing fees are 0.5% and increase each month up to 25% while late payment fees are 5%, much steeper. Therefore, both filing and payment after filing are super important to stay on top of.
No penalty for refunds!
If your tax return results in a refund, the only consequence will be a much later check or direct deposit for that refund. If filed late, the late filing fee will come from the return, but there will be no late payment fees. Therefore if you file and can't find ways to save money, an expert is more likely to know where to save money on your tax return and therefore waive some of your late fees entirely. You have up to three years to claim a refund, but you won't know that until determining if you are qualified for a refund. Again, file as soon as possible to clear up these issues and know for certain if you'll be owing money AND late fees or if you'll be receiving a refund and avoiding further costs.
As we stated earlier the longer you delay in filing and paying once filed, the higher the fees will compound. Also the initial 0.5% and 5% fees are immediately added only a day after being late. There is no grace period for these fees. And if you file more than 60 days late, things get even scarier and this is another reason we implore you to get this all done as soon as possible. Some of us may not have the entire amount available to immediately pay off the amount we owe, but with IRS payment plans, you can at least get started on paying down the total owed and avoid late fees since you've at least committed to paying it off.
If this is your very first time being late with payment or filing, you can have a CPA firm like ourselves help you craft a letter to send to the IRS asking for the fees to be forgiven. This does not always happen, but it's worth trying if you are a first time offender. Depending on your history, the IRS may be more lenient. Call Geyer & Associates CPAs in Fort Collins to ask any additional questions you might have regarding your tax return for this year or fees you may have incurred for failing to file on time. We will help you get everything to the IRS and get you back on track.