We all try our best to meet our tax obligations and stay compliant with state and federal code. However, NewPoint Law Group, LLP recognizes that deadlines may come up too fast or slip your mind. If you are already delinquent on your filing or payment requirements for the IRS or the State of California, you deserve to know the facts.
Different avenues are available depending on whether you owe a filing or payment to the state or the federal government. If you missed the California filing deadline, you may be eligible for an automatic extension for filing, but you will still have to pay to avoid penalties. For federal taxes, it is more difficult to get an extension after the deadline has already passed. You may be able to agree to a payment plan or engage in the voluntary disclosure program.
However, you should not attempt to remedy this situation without the steady guidance of an experienced legal professional. The California tax attorneys at NewPoint Law Group, LLP can support you or your small business at any stage of your tax dilemma. To hear more about our services, call 800-358-0305 today.
What If You Missed the Federal Tax Return Deadline in California?
You may be eligible for an extension on your tax filing and payment deadlines. However, this extension will only apply if you filed Form 4868, which is the IRS Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Form 4868 is only valid if filed prior to the original deadline. The only way that you can file Form 4868 after the deadline is if you were physically outside the United States at the time of the deadline.
If you have already received an extension and failed to meet the extended deadline, you cannot file for another extension. Your next filing will have to be your actual tax return filing.
Outside of an extension, the only way that you can avoid penalties for missed tax deadlines is to show the IRS reasonable cause for not filing promptly. Reasonable cause might include situations where the taxpayer was affected by natural disaster, serious illness, or an unavoidable absence. Talk to your Elk Grove tax attorneys if something outside of your control prevented you from meeting your deadline.
Penalties for Missing the Federal Tax Return Deadline
You may face penalties if you fail to meet your tax responsibilities to the federal government on time. These penalties depend on whether you failed to file or failed to pay.
Failure-to-File (IRC § 6651(a)(1))
The penalty for a failure to file your tax return at the appropriate time is determined by percentage of the total balance you owe. The penalty can be as high as 5% and may be imposed each month that the taxpayer fails to file their return, up to 25%.
Failure-to-Pay (IRC § 6651(a)(2))
If a taxpayer files but fails to pay without stipulating that they are unable to pay, the penalty levied will usually be around 0.5% of the unpaid balance per month that the taxpayer remains delinquent. This number is uncapped and begins immediately upon the taxpayer’s failure to pay. If the taxpayer fails to pay over an extended period of time, the government could impose a lien on the taxpayer’s property.
What if You Missed the California State Tax Filing Deadline?
The rules for missed tax deadlines in the State of California are different from those of the IRS. The California legislature has enacted several different options for delaying tax deadlines in light of the impact of the COVID-19 pandemic on individuals and small businesses in the state.
For personal state income tax filings, California grants individual taxpayers an automatic extension for filing if they miss their original deadline. However, the extension only applies to your filing obligations. You will still have to pay the outstanding tax liability owed on time, even though you can file later.
What Should You Do If You Cannot Pay Your Taxes?
Even if you are unable to pay the balance of your state or federal tax liability, you should still file as soon as possible. Through the filing process, you can indicate your inability to pay to the appropriate agency. Both the IRS and the California Franchise Tax Board offer the ability to create payment plans with taxpayers who are unable to pay their full liability up front.
If you do not pay and fail to file or notify the government agency, the fines will continue to pile up and ultimately may result in criminal charges and jail time.
What Should You Do If You Already Missed the Tax Deadline?
No matter if you missed the state or the federal deadline, your best strategy is often transparency. If you attempt to hide your tax code violations, the government could view that as evidence of fraudulent behavior and attempt to audit you or even bring criminal charges. While the penalties for lateness above are certainly not ideal, they are nothing compared to what accompanies allegations of fraudulent tax code violations.
You may choose to engage in voluntary disclosure in order to limit the potential penalties for your failures. Voluntary disclosure is the process by which taxpayers can produce additional information on their financial dealings and tax liability in hopes of getting right with the federal government. Delinquent or inaccurate tax filers who choose to voluntarily disclose their mistakes often benefit from reduced penalties in return for their honest candor. The federal government wants to reward good actors for saving them the time and money that can go into conducting an audit.
However, voluntary disclosure may not work in every case, and can even harm the taxpayer if done incorrectly. If the government is already aware of aspects of your disclosure, your actions may do little to benefit you. If your conduct could be construed as fraudulent, you may just be adding to the government’s case against you. Never attempt to engage in the voluntary disclosure process without the help of an experienced Stockton tax attorney.