The IRS gives taxpayers until April 15 to file and pay their federal income taxes. People who cannot make this deadline to file can request an extension until October 15 by filling out and submitting IRS Form 4868. This extension will grant taxpayers extra time to file their returns. They must pay their estimated amount of taxes by the April 15 deadline, however.
When the October deadline comes and goes, you might wonder what will happen to you for not filing your taxes on time. You may resolve to file your taxes by the original or extended deadline by learning what could occur if you fail to submit your return by October 15.
If You are Owed a Refund
If you miss both the April 15 and October 15 tax filing deadlines and are owed a refund, chances are that nothing will happen to you. In fact, the IRS will more than likely deduct any interest and penalties you owe from that refund. It is up to you then to file and claim that refund if you want it.
That is not to say you should purposely neglect filing your taxes, however. It is true that the IRS will not go out of its way to remind you to file if it owes you a refund. It does not mind at all that you are lending it more money than you legally are required.
Still, you only have three years to file your return if you want to collect on a refund owed to you. You also should file your next year’s return on time if you do not want the IRS to hold that tax refund as well. It relies on you to file the necessary return if you want to get the refund back to which you are entitled.
If You Owe Money
If you miss the October 15 extended deadline and owe the IRS money, you risk getting yourself into a graver situation. You are encouraged to keep in mind that the IRS receives the same income statements as you do. It has access to statements like:
that verify how much income you have earned during the year. The IRS also knows if you fail to file by the April 15 or October 15 deadline if you have been granted an extension.
Further, the IRS will compile a substitute return for you and then notify you about how much taxes you owe to the federal government. This substitute return will not take into consideration any exemptions or deductions to which you are entitled. It is up to you to include that information on your return when you file.
Once the IRS compiles and notifies you about the substitute return, it will begin collection activity against you. These activities can include levying and seizing your assets including your:
- Bank account
- Retirement savings
- Real estate
- Secondary car or home
- Life insurance policies
You will be notified in writing about the IRS’ intent to seize or levy your assets. You have up to 30 days to dispute the intention or resolve your debt in order to avoid it. It is critical that you do not ignore written notices from the IRS if you want to protect the assets that you own.
Ideally, you should file and pay your taxes as soon as possible after missing the October 15 deadline. If you avoid filing because you realize you cannot pay what you owe, you may want to consider the options available to you for resolving your IRS tax debt.
If You Cannot Pay What You Owe
When you cannot pay what you owe to the IRS in one lump sum, you could take advantage of one of the payment options available to you. For example, if you owe less than $25,000 in taxes and are current on filing your tax returns, you could be eligible for the IRS Fresh Start Program.
This program allows you to be set up on an installment agreement during which you will pay on what you owe over the course of several years. Your monthly payments will be based on how much you earn as well as how much you owe.
The payments will be set up to be affordable so you can make them on time each month. You also will be required to have the payments automatically withdrawn from your checking or savings account each month.
If an installment agreement is not within your budget right now, you could make a case for financial hardship. You could present evidence to the IRS that paying your tax debt even in monthly increments would create extreme financial hardships for you and your household. If you meet the criteria for financial hardship, the IRS will hold off on collecting what you owe right now.
You also could make an Offer in Compromise. This option lets you make a realistic offer to settle your tax debt for a lower amount. It must be based on your current income and the value of the equity in your liquid assets. If your OIC is accepted, you can pay off what you owe for less than the actual amount.
Finally, you could apply for a penalty abatement. An abatement allows you to have the penalties and interest taken off your IRS tax debt. It makes it easier for you to pay off what you owe.
More Time to File
In rare instances, the IRS may allow you extra time to file and pay. This rare extension past the October 15 deadline is reserved primarily for people in the military and taxpayers who live overseas.
These individuals could have until December to file their tax returns. The extension is also reserved for military members who are serving in conflict zones.
The IRS gives taxpayers who apply and are approved for an extension until October 15 to file their returns. Taxpayers must pay their estimated taxes by April 15 each year. You can avoid the risk of penalties, interest, levies, and asset seizures by realizing the detriments of missing the October 15 extended filing date.