How Does The IRS Late Filing Fee Work?

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  • #7894
    Ryan1
    Participant

    The IRS says the following about a late filing penalty:

    “The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.”

    Suppose your 2019 Federal 1040 income tax return was due on July 15, 2020 and you paid 100% of the tax due by that date and timely filed an extension allowing you to file your return by October 15, 2020.

    If you don’t file the return until after October 15th what is the penalty?

    If the penalty is a percentage of the “unpaid taxes” that would mean there is no penalty since there are no unpaid taxes as of October 15, 2020 correct?

    If that’s correct, what’s to prevent you from not filing your tax return until months after October 15 or maybe never at all?

    I don’t get it.

    I have a similar question about the 2019 New York income tax late filing fee, and whether it works the same way as the Federal in case anyone knows.

    Thanks for explaining how this works.

    #7900
    kaneohe
    Participant

    How would you know if you had paid 100% of the taxes due unless you had done a tax return? If you had done a tax return, why wouldn’t you want to file it?

    https://www.legalzoom.com/articles/what-are-the-penalties-for-not-filing-taxes
    “What if you fail to file?

    The IRS may file what is known as a substitute return for you. However, as you well know, the IRS will not be looking to save you any money. In fact, a substitute return will not include any of the standard deductions your accountant would typically include in your return. Case in point, a substitute return only allows one exemption: single or married filing separate, so you end up with higher tax liability than if you would have just filed.”

    There are also statute of limitation provisions that are activated by filing….see linked article

    #7904
    Ryan1
    Participant

    Thank you for your reply and excellent info. A little fuzzy on the language though about “not allowing any of the standard deductions.” Does that mean they don’t actually allow THE Standard Deduction? I don’t think it could mean that. But it’s not clear from that quote.

    I was able to complete my tax return without an extension. So I knew exactly how much tax was due and paid the balance with the request for extension. I owe no further tax.

    There is a legitimate (but unrelated) reason that I filed for the extension and wanted to delay filing, but I’d rather not mention it yet. I would like to further delay it after 10/15 if I could, so I want to try to understand what would happen if I do to compare it to the advantages of delaying.

    I’m not sure if I would lose anything if the IRS did my return. It is single with a standard deduction and I think everything was on 1099s, pretty straight forward. Maybe one small capital gain. Not much subjectivity if any. And for that same reason I don’t think the statute issue will make any difference. Nothing challengeable.

    However, I generally don’t like the concept of their imputing a return and I also don’t like doing something I have never done before. But on the other hand I’m all paid up and don’t see how they could come up with anything additional. As long as it’s not illegal, which I would never consider, might still be an option.

    • This reply was modified 11 months, 2 weeks ago by Ryan1.
    #7907
    kaneohe
    Participant

    That article was written a few yrs ago since it mentions exemptions that no longer exist. My guess is that they would use the standard deduction but would not have any extra adjustments to income…..
    IRA deductions/HSA deductions/etc.shown on Sch 1 since they wouldn’t know about them in your case.

    #7909
    Ryan1
    Participant

    Just read that there is a $300 IRS penalty for late filing. I believe it applies if you had a tax liability whether you still owe money or not. I think that’s the answer to the question. You will pay $300 if you don’t file on time.

    • This reply was modified 11 months, 2 weeks ago by Ryan1.
    #7911
    kaneohe
    Participant

    Do you have a link to that $300 penalty?

    #7914
    Ryan1
    Participant

    I’m not really sure what happened. I posted the links, but when I look here I don’t see them. Yet if I try to post it again it says it was already posted. Maybe they have to be approved first and will show up later? Not sure. Hopefully they will appear. If not I tried!

    Tried 3 times… links not showing up..

    • This reply was modified 11 months, 2 weeks ago by Ryan1.
    #7917
    kaneohe
    Participant

    if the link is simple enough perhaps you can just type it in and not try to make it a link? Then I can try to get it outside the forum. Thanks.

    #7919
    kaneohe
    Participant
    #7920
    kaneohe
    Participant

    #7921
    kaneohe
    Participant

    try posting the url by copy/paste. Using the LINK selection at the top of the submit box resulted in something similar to what you describe………….no post; then on next try: Duplicate note.

    #7922
    kaneohe
    Participant

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