Tax day 2022 is Monday, April 18. But can you skip a year when filing taxes? And what if you miss the tax deadline? Alternatively, can you file taxes if you missed a year previously?
All these are valid questions. And it is better to get the answers to them now, instead of dealing with the problems that may arise later.
The good news is that the IRS won't show up at your door the next day. However, you need to take measures to amend the situation if you miss the tax deadline for 2021.
For example, you have options to request an extension or request a payment agreement. In some cases, you might not even have met the threshold to file your taxes. Take a look at what you should do if you're missing the tax filing deadline.
Read More: What Happens if You Don't File Taxes?
Three Main Things to Know
Here a look at the three big things you need to know about what happens when you miss tax day and don’t file your taxes:
- The IRS will know. The IRS uses sophisticated software to cross-reference payouts to detect when taxpayers haven't filed or paid what they owe. While it may take a few months, a notification from the IRS will be arriving if you skip your taxes.
- The IRS is actually very forgiving when it comes to filing late returns or using relief options to get your debt squared away. You really only have to fear the IRS if you're trying to evade your tax duties.
- You should definitely file your taxes even if you can't pay what you owe. Many people incorrectly assume that's it's worse to file and not pay than it is to simply skip taxes. This is wrong! Only taxpayers who have filed their taxes are eligible for relief options.
IRS May File for You
One little-known fact is that the IRS may actually file your taxes for you if you neglect your duty. Far from being a courtesy, IRS-filed returns can actually hurt you by giving you the least favorable outcome possible. Known as Substitutes for Returns, IRS-filed returns will assess what you owe based on a cookie-cutter formula instead of applying the most favorable deductions for you.
The IRS actually subtracts the tax credits and deductions that you're entitled to as a taxpayer. Some fees for failing to file are also added into the mix.
Know the Filing Thresholds
As part of changes to the 1099-MISC, the IRS brought back the 1099-NEC form for non-employee compensation (NEC) payments starting for people filing for 2020 in 2021. If you think you make too little to have to file taxes, double check those numbers.
For the 2021 tax year, the standard deductions are $12,550 for single, $25,100 for joint filers, and $18,800 for heads of households. For those 65 years or older, there is an extra tax deduction of up to $1,350 for those married but filing jointly, disabled, or blind.
For married filing separately, the filing threshold is just $5, regardless of age. It's always worth filing even if you don't need to because you may be entitled to tax credits.
Read More: What Happens If I Get a 1099 After I File My Taxes?
Understanding Tax Penalties
While penalties are not inevitable, they are in play if you allow your taxes to go unfiled. You'll know that the IRS has gone ahead and filed your taxes for you if you get a "Notice of Deficiency" in the mail. Here's what happens next:
- You have a 90-day window to file your taxes on your own or challenge what the IRS has assessed.
- Failure to respond means that you give the IRS permission to move forward with its (very unfavorable) assessment.
- You're now on the hook for the tax bill that's been assessed by the IRS.
- Failure to pay your tax bill moves you into collections. At this point, the IRS is allowed to garnish your wages , bank accounts and assets. In some rare cases, the IRS could seek criminals charges with penalties that include jail time.
Getting Help Paying Your Taxes
Fortunately, your intervention will allow you to tie up your tax problem neatly as long as you respond before the IRS proceeds with its assessment. The IRS has a robust relief program that allows most taxpayers to pay their taxes in increments using installment agreements that are either streamlined payment plans or non-streamlined payment plans lasting 72 months.
If you meet the qualifications for being unable to pay what you owe, you may have your debt forgiven, reduced or frozen through an Offer in Compromise (OIC) or Currently Not Collectible (CNC) status.
Asking for a Tax Extension
If you think you'll need more time to get everything figured out by tax day, file for an extension to avoid late penalties. Just keep in mind that the IRS still expects you to pay 90 percent of what you owe by the tax-day deadline. While an extension gives you until Oct. 17, 2022, to file your taxes, the full tax total due must be paid by the original deadline to avoid penalties.
- CPA Practice Advisor: April 18 is IRS Tax Deadline for 2022
- IRS.Gov: Filing Past Due Tax Returns
- IRS.Gov: Dealing with SFRs and ASFRs - Substitutes for Returns - IRC 6020(b)
- IRS.Gov: IRS provides tax inflation adjustments for tax year 2021
- National Review: IRS provides tax inflation adjustments for tax year 2022
- IRS.Gov: Earned Income and Earned Income Tax Credit (EITC) Tables
- IRS.Gov: Penalties
- IRS.Gov: Extension of Time To File Your Tax Return
- Kiplinger: 2022 Tax Calendar: Important Tax Due Dates and Deadlines
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.