You can always file a late tax return, even if you haven't filed for several years, or if you've never filed one. But you might not receive a tax refund on a late filing because refunds usually expire after three years. Focus instead on filing your late returns as soon as possible so you can get caught up with the Internal Revenue Service (IRS) and protect your refunds in the future.
Filing Your Taxes Late
Filing a late return can be especially stressful if you have several years of tax returns to prepare rather than just one. But you can catch up with the IRS if you get organized and dedicate some time to the project.
You're in great shape if you already have your original W-2 forms and you saved them so you can lay your hands on them. But the IRS can help you out if you're missing any tax documents. You can request a copy of your Wage and Income Transcript online. The transcript will contain information from various forms, including W-2s and 1099s. Online income transcripts are available for up to 10 years.
Your wage and income transcript won't show any information related to state or local tax withholdings.
Contact your state's revenue or taxation division to find out whether it has any information about your state withholding if you live in a state that has an income tax.
Claiming a Late Refund
You have three years to claim a tax refund in most cases. The three-year period begins with the tax year's original filing deadline. The IRS can't send you a refund after that period has expired.
A refund for tax year 2021 would expire on April 18, 2025, three years past the original tax day deadline of April 18, 2022.
Penalties for Late Filing
Penalties kick in if it turns out that you owe the IRS on any late-filed tax return. The IRS will assess two penalties if you file late, plus interest. There's a failure-to-file penalty of up to 5% of the tax due per month that you're late, up to a maximum of 25%. There's also a failure-to-pay penalty of 0.5% per month, also up to a cap of 25%.
The interest rate is set quarterly by the IRS at the current federal short-term rate plus three percentage points. The interest rate is 3% for the fourth quarter of 2021, the quarter that begins on Oct. 1.
There's no penalty for filing a tax return late if you're due a refund. You should file anyway, because otherwise the IRS won't issue your refund.
Tips for Catching Up With Your Tax Returns
You'll need your transcript from the IRS to fill in necessary information on a substitute form, IRS Form 4852, if you don't have your W-2 forms.
Add the form to your tax return and enter the relevant information if you're using tax preparation software. You must also sign Form 4852, and you should attach a copy of the transcript as well so the IRS will know that you have a reliable source for the numbers you included on your tax return.
You can usually find tax preparation software for past years through software such as H&R Block's products, TaxAct, and Intuit's TurboTax. Each software program has its pros and cons, but all three will suit you well for preparing your tax returns. You can also find prior year federal tax forms through the IRS website.
Try to use the same software product for all the years you must file if you're going to prepare the returns yourself. This allows you to easily import your tax information from one year to another, saving you time and repetitive data entry.
You might also want to think about enlisting the help of a tax professional.
Getting out of Tax Debt
You may find that you owe the IRS money when you've finished your returns. You'll avoid any further fees or penalties if you can pay what you owe immediately, but fees may be charged if you pay by credit card. The IRS can work with you to arrive at a payment plan to help you get out of tax debt if you need a little more time.
Approval of an installment plan to pay your tax due will depend on whether you're caught up on your filings and how much you owe. You'll still accrue penalties and interest until the balance is paid in full, even if the IRS agrees to the plan. Long-term payment plans will incur setup fees as well, which may be waived if certain conditions are met.
Frequently Asked Questions (FAQs)
What is the penalty for filing quarterly estimated taxes late?
The penalties for missing a quarterly estimated tax payment are similar to missing a tax payment that's due with your annual return. The fees are imposed as a percentage that grows the longer you fail to settle the tax liability. You can use IRS Form 2210 to calculate your exact penalty.
When can you start filing taxes?
The IRS typically begins accepting returns in late January or early February. Check back in with the IRS in early January for an updated timeline. In 2021, the IRS began accepting tax returns on February 12.