IRS warns of higher penalties for filing after June 14

The Internal Revenue Service issued a warning Friday to taxpayers who haven’t yet filed their 2018 tax returns that they will face higher tax penalties if they owe taxes and haven’t filed by June 14.

Andrew Harrer/Bloomberg

The IRS lowered the threshold for imposing underwithholding and underpayment penalties earlier this year during tax season because of the complications in the 2017 tax law and the various changes it made in the withholding rules, but that still doesn’t change the failure-to-file penalty. The IRS noted that the failure-to-file penalty is assessed if there is unpaid tax and the taxpayer fails to file a tax return or request an extension by the April due date. That penalty is generally 5 percent of the amount of tax for the year that’s not paid by the original return due date. The IRS charges the penalty for each month or part of a month that a tax return is late. If the return is over 60 days late, there’s a minimum penalty, either $210 or 100 percent of the unpaid tax -- whichever is less.

The IRS acknowledged, however, that special deadlines can affect the penalty and interest calculations for those who qualify, such as members of the military in combat zones, taxpayers residing outside the U.S., and those living in federally declared disaster areas.

Taxpayers who live in a combat zone, such as members of the military, can extend the filing deadline. They can find details in Publication 3, Armed Forces’ Tax Guide. For taxpayers who live and work outside the U.S. and Puerto Rico, or on military duty, the deadline to file is June 17. They also have until June 17 to file Form 4868 for an extension until October 15. An extension of time to file is not an extension of time to pay any tax due.

Taxpayers who have been affected by a presidentially declared disaster who receive a late filing or late payment penalty notice in the mail from the IRS, and who have filed or paid by the deadline stated in the IRS news release of postponement of the deadlines for filing and/or paying, should call the number on the notice to find out if IRS can abate the tax penalty in the wake of the disaster.

Taxpayers who have filed their taxes and paid on time and haven’t been assessed any penalties for the past three years can often qualify to have the penalty abated. See the First-Time Penalty Abatement page on IRS.gov for further info. Taxpayers who don’t qualify for the first-time penalty relief can still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not due to willful neglect. They should read the penalty notice and follow the instructions to ask for the relief. For more, see the Penalty Relief page on IRS.gov.

Earlier this year, the IRS expanded the penalty waiver for those whose 2018 tax withholding and estimated tax payments fell short of their total tax liability for the year. The penalty will be waived this year for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90 percent to avoid a penalty, but the IRS lowered the penalty because of requests from Congress and complaints about all the changes in the withholding rules after the new tax law that led many taxpayers to underwithhold and end up owing taxes when they had their tax returns prepared.