I Haven’t Paid My 2021 Taxes. What Do I Do?

Dear Kristin,

I didn't file my taxes for 2021 yet. How do I get started to fix that? What's it going to cost me?

Sincerely,

Back Taxes

Dear Back Taxes,

Yikes! Filing for 2022 taxes is about to begin, so you’re going to want to fix this ASAP. The government is always happy to recoup any money you owe, so this is a situation you can solve. It’s always better to file late than not at all!

I’m going to assume you haven’t filed your taxes on either the federal or state level, so I’ll go through them separately below. 

Let’s start with the good news. You won’t pay a penalty if you're entitled to a tax refund. As far as the government is concerned, you paid your taxes and are only hurting yourself by delaying payment for money you're owed. If you're owed money, file those taxes right away so you can get it back as soon as possible. That refund could be gone if you wait too long.

But there's bad news if you owe the government money in unpaid taxes. The longer you wait to file, the more you'll owe in fees and penalties. The Internal Revenue Service (IRS) charges a Failure to File penalty that costs 5% of the unpaid taxes you owe each month, up to a maximum of 25% of the unpaid taxes. And if your tax return is over 60 days late (which it is in this case), that penalty is a minimum of $435 or 100% of the tax required on your return, whichever is less.

And the IRS will charge you a Failure to Pay penalty in the form of interest on the unpaid taxes if you file but don’t pay your tax bill: 0.5% each month, up to 25%. The maximum the IRS will charge for both failing to file and failing to pay is 47.5% of the unpaid taxes.

I should also mention that in addition to this, the IRS is allowed to levy or seize property you own to collect on your tax debt. The Failure to Pay penalty jumps from 0.5% per month to 1% per month when it does this.

Similar to your federal taxes, you can file your state taxes late as well. You told us that you live in New York, and the penalties in that state mirror those of the IRS: 5% of the unpaid taxes per month for filing late, up to 25%, and a penalty of 0.5% each month, up to 25%, for failing to pay on time. And your penalty will be $100 or the total amount of taxes due on the return, whichever is less, if your New York state tax return is more than 60 days late.

So you’re going to want to file those taxes immediately, and you might as well do your 2022 taxes while you’re at it because it will be tax season again in the blink of an eye. You don’t want to be in this situation again! The IRS could file for you if you don't file, and it won't give you all the tax credits and deductions you are entitled to receive if it does so.

So how do you do it? Unfortunately, you can’t take advantage of the IRS Free File for back taxes. Free File is a way to file your taxes for free directly online with the IRS, but it’s only available for the current tax filing season so you can use it for your 2022 taxes, if you’re eligible.

You’ll have to go to a registered tax preparer if you want to file your past year’s return electronically and that’ll cost you, but tax preparation software is reasonably priced and it will e-file your return for you as well. Otherwise, you’ll have to file your return the old-fashioned way: print, sign, and mail it to the IRS and to the state. And be sure you use the correct form for that year!

If there’s a reason you can’t file your taxes on time in the future, you can request an extension from the IRS. This could save you from a lot of the problems that come with filing late and you won't owe explanation to the government at all.

Good Luck!

-Kristin

If you have questions about money, Kristin is here to help. Submit an anonymous question and she may answer it in a future column.