Tax Penalties Are about to Increase for Unfiled Tax Returns

If you haven’t filed or extended your 2018 tax return yet, the IRS is urging you to get your return filed quickly, or face an increase in your failure-to-file penalties. As of June 14th, a minimum penalty will be applied to any unfiled tax returns that have unpaid tax debt from 2018. Here’s what you should know about the upcoming penalty increase.

Minimum Penalty on Unfiled Returns

If you missed the filing deadline, and neither filed nor extended your tax return, then a failure-to-file penalty has already been assessed against you. This penalty is 5 percent of any 2018 tax debt that was still unpaid as of April 15th. This percentage is applied every month or part of a month that your tax return remains unfiled.

However, when your return is over 60 days past due, the IRS will apply a minimum penalty on your return. This will be either $210, or 100 percent of your unpaid taxes from 2018, whichever is less. This will be applied to all tax returns that have not been extended, have unpaid taxes for 2018, and are still not filed by June 14th. After this, the 5 percent failure-to-file penalty will continue to be added to what you owe each month your tax return remains unfiled.

How Much of an Increase Is This?

Just how big of a difference this minimum penalty makes in your tax debt will depend on how much unpaid 2018 tax debt you had as of April 15th. But here’s an example: Let’s assume you owed $1,000 when the filing deadline passed. On April 16th, the 5 percent failure-to-file penalty was assessed against you, adding $50 to your tax debt. An additional $50 is added for each month or part of a month that your return remains unfiled, so you currently would have $150 in failure-to-file penalties. If you file your return in the next few days, you would not accrue any additional penalties of this type.

However, if you wait until June 15th to file, your failure-to-file penalties will jump up to $210—an additional $60 for waiting just a few more days. Should you wait longer than this, you would continue to accrue that 5 percent penalty each month or part of a month that your return is unfiled, plus interest on any unpaid tax debt.

What You Should Do

Obviously, the best way to avoid paying the higher failure-to-file penalty is to file your return before June 14th. Contact our Provo tax prep office right away, and we’ll get started on filing your return as quickly as we can.

If you’re worried about paying any unpaid tax debt when you file, talk to us about it. It is always best to file your return and submit a good-faith payment to the IRS. Once we’ve done this, we’ll help you to submit a request for an IRS installment plan or offer in compromise to make your tax debt more affordable and more manageable.

Do You Qualify for a Penalty Waiver?

Certain individuals qualify for penalty abatement from the IRS. If you’ve filed and paid on time, and have had no penalties against you in the last three years, you could qualify for a first-time penalty abatement. Or, if you failed to file due to circumstances beyond your control (e.g., the death of a loved one, military employment, or other reasonable causes), you could still qualify for penalty relief. Contact us to learn more about these penalty waivers and the eligibility requirements for them. We’ll help you determine if you qualify, and work with you to request a penalty abatement if you do.

If you haven’t filed your 2018 return yet, and you didn’t file an extension by April 15th, we urge you to contact our Provo tax prep office immediately. The sooner you contact us, the more likely it is that we will be able to get your return filed before June 14th, so that you can avoid the higher penalties from the IRS.