What Happens If Taxes Are Filed Late?
If taxes are filed late, penalties and interest starts accruing on the unpaid tax, late payment penalties are charged, and the IRS can actually garnish wages or put a lien on property. Find a tax consultant to help with filing taxes using tips from a certified public accountant and personal financial planner in this free video on taxes.
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My name's Miranda Chook, a CPA. So what happens when you file your taxes late? Well, first off, penalties and interests start accruing on that unpaid tax. There's a penalty for filing your return late and that ranges from five to twenty-five percent per month, or part of a month that your taxes go unpaid or your return goes un-filed. There's also a late payment penalty. That ranges from half a percent to twenty-five percent and again, continues on until you pay your taxes. Now the IRS may decide to prepare a substitute return for your using the information returns that they have. However, this will probably result in a tax liability that is higher than if you calculated it because they do not have access to documents that might support expenses and deductions that you can take. So it makes sense for you to go ahead and prepare your own returns even if the IRS has because if you do come up with a lower liability, the IRS in general, will adjust their counts to your number. And keep in mind, once the IRS calculates your taxes due, they're going to start collection efforts and they're not only going to collect the unpaid taxes, but again, there's penalt, penalties for filing late and paying late and will start adding up so they may actually be allowed to garnish your wages or bank account or even put a lien on your property. So if you need help preparing your taxes, you can look on-line, get some tax software, some of it for free, to help you prepare your taxes so that you can get those filed and minimize your penalties and interest.