I hope you enjoyed your three-day weekend. And more than that, I hope you took a moment to pause and reflect on Memorial Day beyond your Milwaukee cookout and the half-off a new mattress deals.
Remember the sacrifice.
Many men and women gave their lives so you and I can benefit from their courage every single day. If you didn’t get a chance to slow down yesterday, why not take a moment right now? These images from Arlington National Cemetery speak volumes.
Enjoying the time off is great. But let’s also carry gratitude for what’s in those images into the rest of our week… including the not-so-glamorous parts.
Like your taxes. (I know, a tough segway. Thanks for bearing with me.)
I specifically want to mention expatriate taxes. If you’re living overseas, your tax clock is ticking.
While all of the domestic taxpayers have already dealt with the April 15 deadline (mostly), you get the benefit of more time — an automatic two-month extension to be exact. (This applies to you if you’re a U.S. citizen or resident alien living abroad or a member of the military stationed outside the U.S.)
But your filing deadline is coming up: June 16, to be exact.
If you did opt to take advantage of the automatic extension, you must attach a statement to your return indicating why you qualify for that extension. No statement? No extension.
And that means you could be accruing penalties and interest on any unpaid taxes. Which is something I want to discuss today. This goes if you’re abroad or living on home soil.
Don’t panic if you missed the deadline and didn’t file for an extension — just act. Because even if you can’t pay everything you owe, filing the return reduces your risk and keeps you in the IRS’s good graces.
But get it handled before it grows teeth…
Filing Taxes Late: How Milwaukee Taxpayers Can Get Back on Track
“It is never too late to learn.” —Malcolm Forbes
You missed the tax deadline. Maybe by a day, maybe by a month. And now you’re wondering: How bad is late tax filing — and can I fix it?
Every tax season, April 15th creeps up fast. And life happens – maybe you were waiting on one last tax form. Or maybe you shoved all your tax documents into a drawer and decided to “handle it tomorrow.”
Whatever the reason, the filing deadline came – and it went. And you didn’t file. Maybe you didn’t even request that six-month extension.
Where does that leave you now?
The big bad
First, let’s get the ugly part out of the way: penalties. If you failed to file by the deadline and didn’t request an extension, you’re looking at a penalty of 5 percent of your unpaid tax bill per month (or partial month) that your return is late, up to a maximum of 25 percent.
But it doesn’t stop there. If you’re more than 60 days late filing your 2024 return, you’ll be hit with a minimum penalty, which is either 510 dollars or 100 percent of the taxes you owe (whichever is less).
And beyond failure-to-file penalties, there are failure-to-pay penalties too: If you owe taxes and didn’t pay on time, the IRS will charge a 0.5 percent penalty per month (again, or partial month) on the unpaid balance. These top out at 25 percent.
(Note: If both penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty for that month.)
Then there’s interest: currently 7 percent of your unpaid taxes (which accrues daily, compounded). Interest may also accrue on unpaid penalties. Both penalties and interest accrue simultaneously on unpaid taxes. However, if both failure-to-file and failure-to-pay penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty for that month.
If you don’t owe the IRS anything, and you’re actually due a refund, these penalties don’t apply. But you still need to file – because you won’t see a dime of that refund until you do (and you’ve got three years max before your refund becomes Uncle Sam’s for good).
Your path forward
The most important thing is that you DON’T ignore this. If you owe the IRS, ignoring them can trigger serious collection actions – The IRS can file liens or levies if you don’t communicate with them or make arrangements to pay. So, here’s your action plan to get your late tax filing taken care of:
Step 1: Check for extensions. There are automatic extensions in special cases: if you’re active-duty military deployed overseas, serving in a combat zone, or if you live in a federally declared disaster area, the IRS might already have extended your filing deadline – no action required. But don’t guess. Check with the IRS (or let us do it for you).
Step 2: File ASAP. People usually hesitate to file because they can’t pay everything they owe. But that delay just makes things worse. The IRS hits you harder for not filing than for not paying. It really makes a difference – I’ve even seen clients avoid over 1K in failure-to-file penalties because they didn’t wait to file until they had the full amount.
Step 3: Pay (what you can). Every dollar reduces your growing balance and slows the penalty accumulation, so pay as much as you’re able. And, look into the options the IRS offers for debt resolution. Depending on what you owe, you may qualify for a short-term (180 days) or long-term (up to 72 months) payment plan. (These depend a lot on your specific situation – I can help you explore what makes the most sense for your case.)
Step 4: Look into your penalty relief options. The IRS offers First-Time Abatement if you’ve filed and paid on time for the previous three years. Alternatively, you can request relief due to reasonable cause (e.g., serious illness, death in the family, fire, natural disaster). Interest typically can’t be waived, but the penalties can.
So we don’t have this talk again next year…
Most of my Southeastern Wisconsin clients’ tax problems come down to two things: timing and preparation. So start thinking ahead to next year NOW. Look to see if your withholding needs to be adjusted, or start making estimated quarterly tax payments (especially if you’re self-employed or have freelance income).
And make a habit of keeping organized records, so you don’t find yourself scrambling for 1099s or receipts next spring.
Remember: You’re not stuck. Late tax filing might be a misstep, but it’s not the end of the road for you financially. Let’s figure this out together and get a plan in motion before penalties and interest spiral out of control:
414-325-2040
Helping you make this right,
Jon Neal