File Late Taxes – How To, Why To

The biggest problem with missing a tax due date is that it gets a little less stressful every day. April 15th is awful, April 16th is bad, but after a while, you might notice that the IRS hasn’t caught up to you. But after a few weeks, it fades into the background: maybe they’ll forget, maybe they filed your information for you. Unfortunately, this is rarely the case. The IRS often takes a while to catch up to delinquent taxpayers, but they definitely try to ensure that people who miss filing have a good reason to file late taxes.

The first incentive the IRS uses is that even if they’re not keeping in touch, you’re accumulating fees and penalties. There are multiple fineable offenses associated with the failure to file taxes on time, even if you do end up getting it done late, and they add up pretty fast. In addition, the IRS charges a brutal rate of interest before you file late taxes — generally, the rate is 1% per month. With your debt accumulating so fast, it’s a good idea to hurry up and slow this process down.

Once you do file late taxes, the situation improves. First, you’ll stop accumulating so many fines. Second, the interest you owe drops to about a quarter of a percentage point per month — one of the lowest-interest borrowings available to any consumer. When you file late taxes, the IRS will ask you to pay them back pretty quickly (immediately, or over a period of months), but this is also not as daunting as it might seem.

Some studies have shown that people who file late taxes are more likely than the rest of the population to get a refund. There are a few reasons for this, but the most likely is that people in a financially strained position are also the most likely to get behind on their paperwork, miss a filing deadline, or worry that they don’t have the funds available to pay. You might expect the IRS to view failure to file as equivalent to stealing, but they really view it as something more like a parking violation: they’d rather you didn’t do it, but they know sometimes it’s worth the fine (and that under the right circumstances, you can ask for the fine to be waived).

The hardest step in the process is to start it. Once you decide to file late taxes, the process is very linear and simple. First, you need to collect whatever information you think you may need — records of your previous tax payments, your bank and brokerage statements, any records of major purchases. Then, you’ll need to select an advisor to help you through the process to file late taxes. It’s generally best to go with someone who mostly works with those who file late taxes, but cost is also an important factor. The best middle ground is to file online.

Websites that help you file late taxes have several advantages over software packages an in-person counselling. First, since they specialize in helping people file late taxes, they are able to focus on exactly what you need. Second, since they are not required to maintain high overhead, they can help you file late taxes much more cost-effectively than a traditional tax preparer. Finally, since they focus on just one part of the tax process, they’re already aware of the problems at pitfalls you’d have to worry about.

It can be daunting to file your taxes late, but it’s a fairly straightforward process. Once you’ve gotten started, it’s very easy to keep going until you’re done. The hard part is getting some momentum.

Byrne Hobart is a New Yorker with widely, perhaps even bizarrely varied interests. He closely follows the startup scene in New York and around the world, and is especially amazed by how small companies are helping people file late taxes without letting the IRS make things difficult.