• Attorney Andrew Steiger

Do You Have Unfiled Tax Returns? File Now to Minimize Potential Tax Penalties

Updated: Jun 14

If you did not file your U.S. 1040 personal income tax return by April 15th, and you ultimately owe additional tax, you will be subject to tax penalties. If you do not owe any additional taxes or have an unpaid tax balance, penalties should not apply. For the 2019 tax year, unfiled IRS tax returns are granted an extension for filing and payment in most cases due to COVID-19. Unless an additional extension is granted, any unfiled tax return after this date will be late unless an extension is filed.


Unfiled Tax Returns with a Tax Debt Due?


For taxpayers with a tax balance due, filing sooner rather than later will minimize the failure to file penalty, which assessed at a rate of 5% of the tax balance due per month. The failure to file penalty will max out after accumulating for 5 months, for a total of 25% of the unpaid tax balance. By mid-September a taxpayer will have accumulated an additional 25% tax balance due. Further, an additional failure to pay penalty applies at a rate of 0.5% per month of the unpaid balance up to a total of 25%.


Other Special Rules for Unfiled Tax Returns or Late Filed Returns with Payment Due


Other special rules may apply as well to taxpayers that either owe additional tax after filing returns or who never timely filed their return. The combined penalty rate for both the failure to pay and file penalties cannot exceed 5% per month. Additionally, taxpayers who file late but within 60 days of the return due date are able to avoid a minimum failure to file penalty of the lesser of $205 or 100% of the unpaid tax balance. Taxpayers who can should file their returns to stop the accumulation of failure to file penalties, which may be substantial relative to failure to pay penalties.


Interest will be assessed on both the unpaid tax balance due and any tax penalties as they accumulate. The current interest rate as of this post is 6%. While the accumulation of penalties may eventually stop, the IRS will continue to assess interest which may lead to substantial total unpaid amounts.


What to Do If You Have an Unfiled Tax Return


Under certain circumstances, taxpayers may be able to reduce or eliminate tax penalties and related interest. If you have questions regarding these tax penalties or unfiled tax returns, contact a tax attorney to determine if you qualify to have assessed tax penalties and interest removed. Contact tax attorney Andrew Steiger at (248) 259-6367 or email me at andrew.steiger@steigertaxlaw.com.


This post is for informational purposes only, and is not intended and cannot be used as legal or tax advice under federal or state law.

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