Tax Blog

Tax Extension Deadline 2023: What You Need to Know About Unfiled Taxes

The October 16, 2023, tax filing deadline is just around the corner, and you need to understand what this means, especially if you have unfiled taxes. The Internal Revenue Service (IRS) has issued a reminder that those who have requested an extension for filing their 2022 tax return should complete their Form 1040 by this date to avoid late filing penalties. 

Why This October 16 Deadline Matters for Unfiled Taxes

What happens if you have unfiled tax returns?

The October 16, 2023, tax filing deadline is not just another date on the calendar, especially for those grappling with unfiled taxes. Missing this deadline can have far-reaching consequences that go beyond mere financial penalties.

The Accumulation of Penalties and Interest

One of the immediate repercussions of missing the tax filing deadline is the accumulation of penalties and interest on any back tax debt you may have. The IRS imposes a failure-to-file penalty, which is usually 5% of the unpaid taxes for each month or part of a month that a tax return is late. This can add up quickly and exacerbate your financial burden. Additionally, interest accrues on both the unpaid amount and the penalties, making your debt grow over time.

Increased Scrutiny from the IRS

When you have unfiled taxes, you’re already on the IRS’s radar. Failing to meet the extended deadline could trigger increased scrutiny, including audits. An audit can be a lengthy, invasive process that requires you to provide extensive documentation to justify your income, deductions, and credits. The stress and time commitment involved in an audit can be overwhelming, especially if you’re already dealing with the anxiety of unfiled taxes.

In extreme cases, consistent failure to file your tax returns can lead to criminal charges. Tax evasion is a federal crime that can result in imprisonment, hefty fines, or both. While the IRS generally prefers to resolve tax issues through civil means, criminal prosecution is still a possibility, especially for those who have a history of non-compliance.

Emotional and Psychological Toll

The stress and anxiety associated with unfiled taxes can take a significant emotional and psychological toll. The looming deadline and the potential consequences of missing it can lead to sleepless nights, strained relationships, and reduced quality of life. Taking proactive steps to meet the deadline can alleviate some of this emotional burden.

The Importance of Professional Guidance

Given the complexities and potential pitfalls associated with unfiled taxes, it’s advisable to seek professional guidance. Tax professionals can help you navigate the intricacies of tax laws, assist in filing your returns, and even negotiate with the IRS on your behalf for penalties and payment plans.

Special Provisions for Areas Affected by Disasters

In the wake of natural calamities, the IRS often provides tax relief to affected taxpayers. This year is no exception. If you reside in disaster-stricken areas, you may have additional time to file your taxes, which is particularly beneficial if you have unfiled taxes from previous years.

Who is Eligible?

Taxpayers in most parts of California, as well as specific regions in Alabama and Georgia, have until October 16, 2023, to file various federal individual and business tax returns and make tax payments. Additionally, those affected by flooding in Illinois and Alaska have an extended deadline until October 31, 2023. For those impacted by flooding in Vermont, the deadline is extended to November 15, 2023.

Special Cases: Natural Disasters and Combat Zones

Taxpayers affected by recent natural disasters, including those impacted by the Maui fires and Hurricane Idalia in parts of Florida, South Carolina, and Georgia, have an even more extended deadline. Residents in the counties of Maui, Hawaii, and many counties in Florida, South Carolina, and Georgia have until February 24, 2024, to file various individual and business tax returns.

Members of the military and others serving in combat zones typically have 180 days after they leave the combat zone to file returns and pay any taxes due.

How to Apply for Disaster Relief

If you’re in an area that has been declared a disaster zone by the Federal Emergency Management Agency (FEMA), you may be eligible for tax relief. To find out the latest information on disaster relief and how it affects your tax obligations, visit the disaster relief page on the IRS website.

Importance for Those with Unfiled Taxes

For those with unfiled taxes, these extensions can provide much-needed time to get your financial affairs in order. However, you should use this time wisely. Consult a tax professional to explore your options for dealing with back tax debt, such as Offers in Compromise or Installment Agreements, and make a plan to file your taxes before the new extended deadline.

Dealing with Back Tax Debt: Offers in Compromise

One of the ways to deal with back tax debt is through an Offer in Compromise (OIC). An OIC allows you to settle your tax debt for less than the full amount you owe. However, not everyone qualifies for an OIC. The IRS considers your ability to pay, income, expenses, and asset equity when determining your eligibility. If you’re considering an OIC, consult a tax professional to assess your situation and guide you through the process.

Installment Agreements: A Viable Payment Plan

Another option for managing back tax debt is through an Installment Agreement. This payment plan allows you to pay off your tax debt in smaller, more manageable monthly payments. The IRS offers various types of Installment Agreements, each with its own set of qualifications and conditions. It’s advisable to consult with a tax expert to determine which plan is most suitable for your financial situation.

Additional Resources for Taxpayers

The IRS provides several online resources to assist taxpayers in filing their returns. IRS Free File is available through October 16 and is accessible to anyone with an adjusted gross income (AGI) of $73,000 or less in 2022. For those with an AGI greater than $73,000, IRS Free File Fillable Forms are available for those comfortable with preparing their own tax returns.

Final Thoughts

The October 16, 2023, tax filing deadline is an important date that taxpayers should not overlook, especially those with unfiled taxes. Missing this deadline can result in penalties and further complicate your financial situation. Therefore, it’s essential to explore options like Offers in Compromise and Installment Agreements to manage back tax debt effectively.

There’s Still Time: Don’t let unfiled taxes become a lingering issue; take action now to secure your financial future. Call The Tax Defenders today for a free attorney consultation.