The Denver tax deadline date has passed for filing your taxes with the State of Colorado and Federal IRS. Hopefully you filed an extension. Let’s have a look at what happens when you fail to file for your taxes within the due date. The consequences include; payment penalties and interest charges. But there are also some ways to minimize these costs such as installment plans, offer in compromise and bankruptcy. Continue reading to know more about the negative outcomes of missing the tax deadline and available solutions.
This year’s Denver tax deadline was April 15 which has already gone. Did you file your tax returns on time? Chances are that you are among that 95 % of the population who dutifully pay their taxes every year. If the answer is yes, then you can relax. But those who have missed the boat might be facing some consequences in the form of penalties and fees. And the only way you could reduce the additional payment is filing and paying your taxes as soon as possible.
After missing the final date, the question that whether you’ll face IRS penalties generally depends on the following two conditions:
Case 1: When Penalties Don’t Apply
If you are expecting a tax refund from IRS but failed to file for the refund on the desired date. The IRS will not penalize you. As the government will be happy to keep your money without any interest and for a longer period of time. However, it is always recommended to file for it as soon as you can. Because the sooner you file, faster you’ll get the refund. Also, after three years from the Denver tax deadline you’ll no longer be able to claim a refund.
Case 2: When Penalties Apply
The complete scenario changes when you owe money to IRS missed the Denver tax deadline and also didn’t applied for an extension. In this case, you’ll have to face two types of penalties. First applies when you didn’t file in the first place. While the other applies in case you file for the return but failed to pay by the deadline. Further, it is important to note the former one is many times higher than the later. In addition to this, you’ll also have to pay interest on unpaid taxes, which is compounded daily with a rate equal to the federal short-term rate, plus 3%.
Given is the complete detail of each type of penalty that you’ll be dealing with after missing out the deadline.
Failure to File Penalty (FTF)
It consists of 5% of your unpaid taxes for every month after the due date. It is capped at a maximum of 25%. Plus, if more than 60 days have passed and you attempt to file. You’ll be charged a fee of $135 OR 100 percent of the unpaid amount (the lesser of these two amounts).
Failure to Pay Penalty (FTP)
Failure to pay penalty is much lesser as compared to FTF. It is 0.5% of your total unpaid taxes for each month after the deadline, up to 25%.
In case, the two penalties are running concurrently. The IRS will charge the maximum of two, i.e. FTF only at a rate of 5%.
In short, these consequences can pile up even if you are only a few weeks behind on your tax returns. Not only this, but the IRS will also start its follow-up operation in which you’ll expect the following outcomes:
- IRS will file a federal tax lien to claim your property.
- Your social security benefits will also be affected.
- The IRS can also place a levy on your bank accounts and wages.
- You may be heavily fined or jailed if found guilty for tax evasion.
All of this may sound a little too much. But, in fact, this is the ultimate end in case you don’t pay back the government’s money for a long period. However, there are some solutions available that you can adapt to avoid such extreme measures taken by the IRS. First of all, file for the tax return immediately and pay your taxes upfront as much as you can. The sooner you file, the less you’ll have to pay.
Options to Consider After Missing the Deadline
Here are a few things you can do to reduce the burden of your unpaid taxes:
- If there was a valid reason for not filing and paying taxes such as health issues or accident. You can convince the IRS to reduce the late filing fee by telling a reasonable cause.
- You can also settle a payment agreement with IRS in case you failed to pay the taxes within 120 days of due date.
- You may also apply for IRS offer in compromise. In which IRS will access your assets and may allow you to pay less than what was actually due.
- If you are in a more challenging financial situation that not only IRS but other creditors are harassing you. Considering filing for bankruptcy to end your money-related troubles. It will automatically stop the creditors and IRS to collect money from you. And you will be in a better position to have a fresh financial start.
As always, I offer a free consultation to discuss bankruptcy options for anyone in the Denver metro area and surrounding cities like Aurora, Centennial, Englewood, Littleton and more.