Filing Late Taxes: What You Need to Know

Tax season can be a challenging time for many, and while timely filing is important, it’s not the only factor that can trigger an audit. Many people wonder if they will be audited by the IRS if they file their taxes late. This article aims to clarify any doubts and provide insight into the factors that do and do not trigger an IRS audit.

Understanding the Risk of an Audit

It's important to understand that being behind on your tax filing is just one of many potential triggers for an IRS audit. The IRS has the authority to audit any taxpayer for any reason, but there are specific scenarios that are more likely to result in an audit.

High Income and Low Withholding

One of the primary reasons for an IRS audit is high income with low withholding. If you have a high salary or other substantial income, you should ensure that you have withheld sufficient taxes throughout the year. This is because the IRS closely monitors returns of high-income earners to ensure compliance. Regular withholding can reduce the risk of an audit, as it shows that you have been making estimated tax payments.

High Credits and Deductions vs. Income Discrepancies

Another significant factor that triggers an audit is when there is an exceptionally high amount of credits or deductions relative to the reported income. For instance, if you claim a large number of deductions and credits that do not match your reported wages, the IRS will likely find it suspicious and may request further documentation.

The Consequences of Late Filing Without An Extension

While the likelihood of being audited due to late filing is relatively low, you can be assured of one thing: you will face significant penalties and fees for late submission.

Penalties and Fees for Late Filing

The penalties for late filing are substantial and can add up quickly. If you file your taxes four months after the due date, you will be subject to a 5% penalty on the unpaid taxes, with a minimum of $135. Additionally, there is a late payment penalty of 0.5% per month (or part of a month) of the unpaid taxes, up to a maximum of 25%.

To avoid these penalties, it is always advisable to file your taxes as soon as possible or to request an extension. An extension gives you an additional six months to file your returns without facing penalties. However, keep in mind that your tax liability is still due on the original date, so you will need to make the payment promptly even if you file for an extension.

How to Minimize the Risk of an Audit and Penalties

To minimize the risk of an audit and the penalties associated with late filing, there are several steps you can take:

1. Regularly Check Your Withholding

Ensure that your withholding matches your actual income and tax liability. Consider speaking with a tax professional or using a withholding calculator to determine the correct amount of taxes to be withheld from your paycheck.

2. Keep Accurate Records

Keep thorough records of all your income, expenses, and tax transactions. This will make it easier for you to substantiate any deductions or credits you claim on your tax return.

3. Request an Extension

If you are unable to file your taxes on time, request an extension to file. This will give you more time to gather all the necessary documents and complete your return without incurring penalties for late filing.

Conclusion

While it is possible to file taxes late and face penalties, the likelihood of being audited is generally low unless you have significant discrepancies between your income and credits or deductions. By following the tips provided here, you can minimize the risk of an audit and the fees associated with late filing.