Did you know that the average person spends about 12 hours a week preparing and attending meetings? And that’s just for work. When you add in all of the major commitments, deadlines, and important dates in our personal lives like doctor appointments, birthday celebrations, and family events, it’s no wonder that some things slip through the cracks – including tax deadlines.
Here are some common reasons why an individual or business might miss a deadline, followed by practical solutions to each of these challenges. For peace of mind now and a more affordable, stress-free tax season next year, keep reading.
Top 3 Reasons Why People Miss Tax Deadlines
Firstly, let’s get this out of the way: if you missed a tax deadline, you’re not alone. At Lodestar, we help countless individuals and organizations with their taxes every year. Unsurprisingly, we hear the same reasons again and again for why people miss even the most important dates.
#1. I was just so busy, I didn’t realize the deadline was here already!
Like we said earlier, it happens. Here’s how you can prevent a busy period taking over your schedule to the detriment of your tax obligations.
SOLUTION: Add all of the major tax dates and deadlines to your personal and business calendars, and set recurring reminders as each date gets closer. Need help? Download our free tax calendar here.
#2. I knew I was behind on saving for my taxes, and I was worried about being overwhelmed.
This concern comes up often, and it’s a valid one. Knowing that you’re behind on your savings goals and you’ll likely owe a substantial amount can be overwhelming. It’s human nature to be tempted to do nothing. But here again we’ve got some good news. There are a few ways you can ensure you’re saving enough throughout the year.
SOLUTION: A good estimate of how much you should save for your federal and state taxes is 20-30% (unless your expenses exceed your income). Choose to take out that much from your monthly income or from every payment you receive. Then store it in a high-interest savings account separate from your regular bank account.
#3. I already know how much I owe, and I just can’t pay that much!
This is by far the Number 1 reason clients give us for why they miss tax deadlines. Because they know the amount they owe is outside their reach, some elect to just “put it off.” They end up doing nothing until it’s much too late. If you’re having trouble with the amount you owe in taxes, here’s what you can do.
SOLUTION: The IRS has options like a short-term extension to pay, an installment agreement, or offer in compromise. They can even temporarily delay collection or reduce your payment as a last resort. The key is to ensure that you file on time and get professional help to explore your payment options.
So maybe you weren’t sure about this year’s tax deadlines. After all, the year has seen much change and that shows no signs of letting up. Or maybe you had the date right, but one of these obstacles got in your way. Either way, you missed the deadline. Now what?
The Truth Behind Why Tax Deadlines Really Matter
There is a prevailing misconception that putting off filing your tax return until you’ve saved enough means that the “damage” won’t be as bad. Things can’t get any worse, right? Wrong. There are serious penalties for not filing and paying your taxes on time.
At Lodestar, we pride ourselves on our proactive approach. We take the time to not only let our clients know what they owe, but also to educate them on exactly why they owe that amount and what contributed to their tax return as it stands.
There are the two major penalties associated with procrastinating:
- Penalty #1, a.k.a. failure to pay. This can attract a recurring monthly charge based on your total amount owing.
- Penalty # 2, a.k.a failure to file. The penalty for filing late (which is the larger of these two penalties) can be avoided if you just file for an extension. If instead, you decide to wait until you have the money to pay and then file, you’ll get hit with both penalties.
Proven Solutions If You’ve Missed A Deadline
Picture this. You’re a business owner who’s been hit by an economic downturn and fallen prey to fraud. The IRS has assessed you with late filing penalties, underestimated tax penalties, and interest. Everything you’ve worked so hard to build is at stake and you’re understandably distraught. What can you do?
This is the very real situation that brought a client to Lodestar recently. They were referred by a mutual client who had been impressed by our ability to go to bat for them with the IRS and get certain penalties waived. We first offered hope to this new client, as well as education, and explained our unique process in detail. Once we had their buy-in, we worked to safely remove them from the process entirely and dealt directly with the IRS on their behalf. This immediate move to get the IRS off the client’s back granted them much-needed breathing room. Following this, we were able to clearly establish why their circumstances were severe, unusual, and outside of their control. As a result, we got 75% of their total penalties abated! That client has since become a cheerleader for Lodestar.
The widespread ignorance about tax deadlines and penalties is harming businesses and individuals alike. Opt for education-based, forward-looking tax planning to guide you in reshaping your tax picture, not just for the current year but to help you avoid pitfalls in the future.
Lodestar clients love that we don’t leave them where we found them. Instead, we take them to the next level of tax compliance and minimization through education and awareness. And for us, the relief, gratitude, and referral of a happy client is by far our best reward!