You flip your calendar to the month of May, and it makes you think of warmer weather and sunny days. Then you realize something awful: you forgot to file your federal tax return! What can you do? First, do not panic if you missed the tax deadline, says the Pennsylvania Institute of Certified Public Accountants. Here are some reasons why your mistake may not be as bad as it sounds.
You Still Have a Chance to File
The worst thing you can do is to throw up your hands and hope nobody notices. Instead, gather up all your tax documents and complete and submit your tax return as soon as possible. You should have received all of your tax reporting forms, but if you haven’t, contact your employer for forms such as your W-2 or reach out to a client for a 1099 for miscellaneous income. Get in touch with your bank or financial institution if you don’t have the proper forms reporting investment or dividend income you received or the student loan or mortgage interest you paid. To complete your return, you’ll also want to locate receipts and other paperwork to document any deductions you plan to take.
Filing as Quickly as Possible Can Save You Money
When you fail to file your return or pay your outstanding taxes on time, you may be subject to penalties and interest. In most cases, the penalty for failing to file is 10 times higher than the one for failure to pay. This is why submitting your return—and paying as much as you can, even if you can’t pay in full—is so important. Be aware that the interest you’ll be charged for a late payment will keep accruing until the date you pay in full, so time is of the essence. If you need help getting your return done in a hurry, to turn to your CPA for help.
Paying What You Can Will Help
If you’re unable to pay your entire tax bill right now, the IRS has monthly payment plans available for those who need more time to pay. You may still be hit with penalties and interest on whatever you don’t pay on time, but you can often whittle down your bill at your own pace and avoid penalties or interest on the entire amount.
You May Not Owe a Penalty at All
If you complete your return and find that you are owed a refund, that’s great news for two reasons. First, you’ll now be receiving money instead of paying. Second, even though your return is late, you will not owe interest and penalties since you don’t owe any taxes. But if you don’t file your return within three years, you could forfeit your right to the refund. Finally getting your return together could provide a welcome surprise. The IRS may waive your penalties or interest if this is your first time filing late, or if you can make a strong case to prove you had reasonable cause to miss the deadlines to file or pay your taxes. Consult your CPA if you believe you’re in this situation.
Your CPA Can Help
Roughly 7 million people fail to file their taxes each year, according to IRS research. Don’t be one of them. Whether you’re having trouble completing your return or need more time to make your payment, your CPA offers the advice you need to get back on track with your taxes. Turn to him or her with all your financial concerns. Don’t have a CPA? Friends and family may be able to recommend a trusted adviser. You can also use PICPA’s CPA locator tool at www.picpa.org/moneyandlife.
Originally published April 25, 2016