Each year on October 15th our office will receive calls from panicked tax preparation clients asking if we can file another extension for them. Unfortunately for them, there is no second, third, fourth, etc. extension that can be filed. Their tax filing obligation is now due. So, what happens to them now? Here are a few cases that our office has run into that showcase what happens to those that miss their tax filing deadline.
I’m Getting A Refund?
We know that filing income tax returns is a pain to do. We wouldn’t have a job otherwise. Nobody likes to think about something that they just don’t like to do, which is why tax deadlines come and go for some people without filing their return.
Most returns we prepare do end up receiving a refund. This is true even if you are filing late. If you are due a refund that exceeds the late fees, interest and penalties assessed by taxing organizations, you will still receive a portion of that refund. More often than not though, you do receive the full refund.
I Owe A Ton Of Money?
Nobody wants to give up money to the Government. They tax us enough already. This is the most common type of late filer we see. The problem is, the taxing entities are adding late fees, interest and penalties to the amount you owe them, which is going to cause the taxpayer to owe more money.
This approach also costs the taxpayer more in preparation fees. There are going to be notices received from the taxing entities that are going to have to be responded to. There are letters that will need to be sent, phone calls made, faxes sent, etc. Each of these things takes more time and add to the cost of filing the tax return.
I Have Multiple Years That Are Late
If you are late for multiple years you have probably received a ton of correspondence from the taxing entities. They love mail and will probably continue to send letters until they actually have to pay for their own postage. They even send mail once the issue is resolved and the tax return filed.
Filing multiple years late may or may not be a bad thing. If you are getting money back, it may offset those fees, penalties and interest. However, you are giving up any interest you may have earned on that money or missed spending it on something you may have wanted. If you owe money, you are going to get hit with those fees, penalties and interest we keep talking about.
You are again going to be paying your tax preparer more money to file your tax return. Multiple years are going to take more time obviously than a single year. The good thing is there will likely be consistency in the preparation of the return.
As the filing deadlines are pretty much the same each year, and sometimes even slightly later due to weekends and holidays, there really is no excuse to miss tax filing deadlines. One thing to keep in mind when using a paid tax preparer is that they cannot turn your tax return around in a day when there is a deadline approaching. Paid tax preparers work with numerous clients and most of them managed to submit their paperwork on time and will be first in line to have their return prepared and filed. Last minute filings cost more money for the client and may have errors due to rushed work. Utilize pre-tax preparation meetings with your preparer and many of the tax planning tips they have provided to you throughout the year.