What to Do if Clients Missed Tax Filing Deadline?

As a tax professional, it’s not uncommon to encounter clients who have missed the tax filing deadline, leaving them feeling anxious and uncertain about the next steps. In this comprehensive article, we will discuss effective strategies for addressing the needs of clients who have missed the tax filing deadline and guide them through the necessary procedures to rectify their tax situation. By understanding the potential consequences and remedies available, you can provide your clients with the expertise and reassurance they need to navigate this challenging scenario. As a result, you will strengthen your reputation as a reliable, knowledgeable tax expert capable of handling even the most complex tax issues.

 

Do you have clients who did not file by the deadline and owe taxes? Of course, you do. We all do.

 

If you haven’t already done so, it might be time to give your tax-delinquent clients a heads up. They need to file a return as soon as possible and pay down their balances to reduce penalties and interest.

 

What’s the rush? If you’re late, you’re late. Might as well take your time now, right?

 

Well … not exactly.

 

Remember those penalties we mentioned?

 

Right. Those.

 

Don’t Wait Too Long

Filing sooner rather than later is especially important because the late-filing penalty on unpaid taxes adds up quickly. Depending on how much is owed, that could be a pretty hefty sum. And even with the extension, do you trust the IRS won’t charge your clients penalties even though the glitch was on their side?

 

The late-filing penalty, also known as the failure-to-file penalty, usually amounts to 5 percent of taxes due for each month or part of a month a return is late. And if a return is filed more than 60 days after the April due date, the minimum penalty is either $210 or 100 percent of the unpaid tax, whichever is less.

 

What Does This Mean?

If the tax due is $210 or less, the penalty is equal to the tax amount due.

 

If the tax due is more than $210, the penalty is at least $210.

 

But the IRS has a heart. There are always special circumstances.

 

 

Here Are Two Special Circumstances:

1) In some instances, a taxpayer filing after the deadline may qualify for penalty relief. This is where you come in. If there is a good reason for your client filing late, be sure to attach an explanation to the tax return.

 

2) Do your clients with a history of filing and paying on time know they may be rewarded for their great track records? Again, it’s your job to step in and make them aware. A taxpayer will usually qualify for penalty-relief if they haven’t been assessed penalties for the past three years and also meet other requirements.

 

So if your client happens to slip behind one year they often qualify for leniency. The IRS may provide administrative relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy.

 

Your client may qualify for administrative relief from penalties for failing to file their tax return, pay on time, and/or deposit taxes when due under the Service’s First Time Penalty Abatement policy:

• They didn’t previously have to file a return or they have no penalties for the 3 tax years prior to the tax year in which they received a penalty.
• They filed all currently required returns or filed an extension of time to file.
• They have paid or arranged to pay, any tax due.

 

Keep in mind the failure-to-pay penalty will continue to accrue until the tax is paid in full.

 

Note: We suggest you wait until your client fully pays taxes due prior to requesting penalty relief under the Service’s first-time penalty abatement policy.

 

Now the Good News

There’s also Good news for those who qualify: IRS Free File is still available on IRS.gov through Oct. 15 to prepare and file returns electronically.

 

For more information about First Time Penalty Abatement and more, become a member of IRS Solutions Software. We give you the confidence to provide services you may have been uncomfortable with in the past.

 

Another benefit of membership is the training you get on our monthly case study calls. Don’t Miss Out! Sign up with IRS Solutions Software and Gain Access to These Informative Monthly Case Study Webinars on the 4th Thursday of Every Month at 10am-11am PDT.