What Is The Penalty For Not Filing A Tax Return | What Is The Penalty For Not Filing Taxes Last Year
IRS Failure to File Penalty for Not Filing a Tax Return
There are typically two reasons for a taxpayer’s failure to file. 1) Taxpayers fail to file tax returns because of their filing requirements. 2) Others don’t file a tax return because they don’t have money to pay.
Failing to file is the worst thing you can do. The IRS’ failure to file a penalty is significantly higher than the penalty for failure to pay. Also, you have considerably more options if you are in filing compliance.
The IRS issues some harsh penalties for taxpayers who don’t file their tax returns.
When will the IRS Assess the Failure-to-File Penalty
The IRS assesses the failure-to-file penalty (FTF) on the first day your tax return is considered late. The “Timely Filed Date” or the Filing Deadline is when the taxpayer can file a tax return and have the IRS believe it was filed timely.
If you file for a six-month extension, you avoid the IRS failure-to-file penalty until the extension deadline (generally October 15th).
The failure-to-file (FTF) penalty only applies if you owe taxes. I
f you don’t owe income tax but fail to file, there can be other downsides for not filing.
Standard Failure to File Penalty
The failure-to-file penalty is 5% of your outstanding tax liability. The penalty gets assessed the first day you are late and every month after that until you file your return. The maximum penalty can be up to 25% of your outstanding balance. The IRS caps this penalty at a maximum of 25% on your outstanding liability.
If the failure to file (FTF) penalty and the failure to pay (FTP) penalty is being assessed in the same month, then the maximum combined assessed penalty is 5% (4.5% failure to file and .5% failure to pay).
The IRS charges a minimum failure-to-pay penalty if you file at least 60 days late. That is less than $450 or 100% of the tax due.
Abatement Possibilities for the Failure-to-File Penalty
Luckily, the IRS removes about a third of penalties. Suppose you haven’t filed late before you can qualify for the first-time abatement (FTA) program. In other cases, you can receive penalty abatement if you prove there was a reasonable cause that prevented you from filing on time.
The IRS accepts many reasonable causes and handles each situation on a case-by-case basis.
Here are just some reasonable causes:
- Postage shortage. You mailed the return, but it was returned because the postage was short.
- Destruction of your records or place of business due to circumstances outside of your control (including fires, hurricanes, and other natural disasters)
- An IRS employee gave you bad information (rarely accepted, without proof)
- Death or the grave illness of a family member