Attention taxpayers…have you yet to file your 2018 taxes? The Internal Revenue Service (IRS) issued a warning Friday saying that taxpayers will face higher tax penalties if they owe taxes and fail to file by June 14th.

2018 Deadlines

The deadline to file individual tax returns (form 1040) was generally April 15th 2019 for the 2018 tax year (it was April 17th for those living in Maine or Massachusetts). These dates also marked the deadline to request a six month extension through Form 4868.

When is the penalty assessed?

The “failure-to-file” penalty is assessed if there is unpaid tax and the taxpayer fails to file a tax return or request an extension by the April due date.

How much is the penalty?

Typically the penalty is 5% of tax for the year that’s not paid by the original due date. The penalty is charged for each month (or part of a month) that a tax return is late. However, if the return is more than 60 days late, there is a minimum penalty of $210 or 100% of the unpaid tax (whichever is less).

Are there any exceptions?

There are special deadlines that affect the penalty and interest calculations for…

1. Members of the military serving in combat zones- They are granted an automatic 180 day extension of time to file and pay. The extension does not begin until after you leave the combat zone.
2. Taxpayers living outside the U.S.- The deadline to file is June 17th. If you need an extension, you have until June 17th to file Form 4868.
3. Taxpayers living in federally declared disaster areas- If an affected taxpayer receives a late filing or late payment penalty notice from the IRS and they filed or paid by the deadline stated in the IRS news release of postponement of the deadlines for filing and/or paying, they should call the telephone number on the notice to see if the IRS can abate the penalty due to the disaster.
4. Taxpayers who have filed on time and have not been penalized for the past three years- The IRS has a First-Time Penalty Abatement available. If you don’t qualify for the first time penalty relief, you may still qualify for penalty relief if your failure to file or pay on time was due to reasonable cause, not willful neglect.
5. Taxpayers whose 2018 tax withholding and estimated tax payments fell short of their total tax liability for the year- The penalty will be waived for any taxpayer who paid at least 80% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments (or a combination of both).

What about interest?

In addition to penalties, interest will be charged on any tax not paid by the regular April deadline.

Trouble paying?

If you are unable to pay what you owe, you may be tempted to delay filing. However, you may qualify for one of the IRS payment options. These include:

• Installment agreement- Taxpayers who owe $50,000 or less in combined tax, penalties and interest can request a payment plan using the IRS Online Payment Agreement application. For those with a balance under $100,000 can also qualify for a short-term agreement. Visit IRS.gov installment agreements page for further guidance.
• Offer in compromise- You may be able to settle your tax bill for less than the full amount by submitting an offer in compromise. Learn more here.

Avoid having the same issues next filing season by increasing the amount of tax withheld from your paycheck! Check out the IRS Withholding Calculator.

Need further guidance? Contact our Tax Services Team.