Missed the Tax Deadline. Now What?

Tax season is over, and now taxpayers get to relax and kick back. Well, that is only true at least until the Internal Revenue Service (IRS) “randomly” starts auditing tax returns. For South Carolina Legal Services (SCLS) Low Income Taxpayer Clinic, tax season is never over. We assist low-income South Carolinians in resolving federal tax controversies that often seem to be endless. Our goal is to ensure the fairness and integrity of the federal tax system for our low income taxpayers, and to educate them about their rights and responsibilities as taxpayers.

According to a recent article from ProPublica titled, Where in the U.S. Are You Most Likely to Be Audited by the IRS?[1], the national average of IRS audits is 7.7 per 1,000 people.  IRS audits are disproportionately higher in low-income areas, especially in those where taxpayers claim the earned income credit, which is designed to help boost low-income workers out of poverty.  The IRS audits Earned Income Credit recipients at a higher rate than all but the richest Americans.   Of the 46 counties in our great state, only 8 counties are at or below the national audit average, with Lexington County having the lowest audit rate at 7.4 per 1,000 people.   The remaining 38 counties of South Carolina are above the national average.   Of the 38 counties above the national average for audits, 12 are at or above 9.0 per 1,000 people, with Allendale County leading the way at 10.3 per 1,000 people.  Of those 12 counties, ALL of them are rural counties.

Our tax system relies on taxpayers to report their income “freely and voluntarily”, calculate tax liability correctly, and file tax returns on time. Filing a tax return on time is our number one responsibility as taxpayers. It can be quite of a responsibility, especially for those taxpayers that do not understand how our tax system works.

There are circumstances that are beyond a taxpayer’s control that can cause them to miss the deadline to file their tax returns. These circumstances can be death, illness, divorce, and even the lack of knowledge or the inability to understand the complicated IRS tax rules that are constantly changing. Of course, there are also taxpayers that purposely miss the filing deadline simply because they believe that taxes are unconstitutional.  Unfortunately, the IRS does not care much about the reason or circumstances that caused a taxpayer to file a late return or to not file at all.

What happens when a taxpayer does not file tax returns before the due date or when the taxpayer doesn’t file at all? Well, just like everything that is tax related, the answer is, it all depends. It depends on whether there is a refund due, or if there is any balance due, or if an extension was requested. Before I start explaining all the “magnificent” details of what could or will happen when a taxpayer files late or does not file at all, I would like to point out that the IRS offers the option to request an extension to file your tax return. This can be done by completing and filing IRS form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The extension gives the taxpayers an additional six months (until October 15 of that year) to prepare and file taxes.  An Extension DOES NOT give you more time to pay any balance due. Taxpayers should pay all or part of the estimated income tax due when requesting the extension.  Otherwise, the IRS will assess penalties and interest on them.

In the May edition of The Legal Chatter, we will look at some of these specific situations.


[1] Kiel, Paul & Fresques, Hannah “Where in The U.S. Are You Most Likely to Be Audited by the IRS?” April 2019: https://projects.propublica.org/graphics/eitc-audit. Web. April 2019