Delinquent Return
Definition
A delinquent return refers to a tax return that a taxpayer fails to file by the due date prescribed by the Internal Revenue Code (IRC). When a return is not submitted within this timeframe, it may incur penalties, which can be either a flat fee or contingent upon the amount of unpaid tax liability.
Examples
- Individual Income Tax Return: An individual fails to file their annual Form 1040 by the April 15 deadline.
- Business Tax Return: A corporation does not submit its Form 1120 by the March 15 deadline.
- Quarterly Payroll Tax Return: An employer fails to file Form 941 by the respective quarterly due dates.
Frequently Asked Questions (FAQ)
Q1: What are the consequences of filing a tax return late?
A1: Late filing of a tax return can result in penalties and interest. The Failure-to-File Penalty is typically more severe and accumulates over time.
Q2: How is the Failure-to-File Penalty calculated?
A2: The penalty is generally 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%.
Q3: Can the Failure-to-File Penalty be waived?
A3: Yes, the IRS may waive the penalty if you can show reasonable cause for the delay in filing.
Q4: What should I do if I cannot file my return by the due date?
A4: You should file for an extension using Form 4868 for individuals or Form 7004 for businesses, which typically grants an additional six months to file.
Q5: Is an extension to file also an extension to pay any taxes due?
A5: No, an extension to file does not extend the due date for payment of any taxes owed. Taxes are still due on the original deadline.
- Failure-to-File Penalty: A penalty imposed by the IRS for not filing a tax return by the deadline.
- Failure-to-Pay Penalty: A penalty for not paying the amount of tax owed by the due date.
- Tax Extension: A formal request made to the IRS to extend the deadline for filing a tax return.
- Interest on Unpaid Taxes: Interest charges on tax amounts not paid by the due date, in addition to penalties.
Online References
Suggested Books for Further Study
- “J.K. Lasser’s Your Income Tax Professional Edition 2023” by J.K. Lasser Institute
- “Tax Savvy for Small Business” by Frederick W. Daily
- “Stand Up to the IRS” by Frederick W. Daily
Fundamentals of Delinquent Return: Taxation Basics Quiz
### Does the failure-to-file penalty apply if a taxpayer misses the filing deadline but has no tax liability?
- [ ] Yes, the penalty applies regardless of tax liability.
- [x] No, the penalty generally applies only if there is an unpaid tax liability.
- [ ] The penalty applies if any form is missing, regardless of financial status.
- [ ] Penalty is always a flat fee.
> **Explanation:** Generally, the failure-to-file penalty is based on the amount of unpaid taxes; if there is no tax liability, the penalty may not apply.
### How much is the failure-to-file penalty per month?
- [ ] 1%
- [ ] 2%
- [x] 5%
- [ ] 10%
> **Explanation:** The failure-to-file penalty is typically 5% of the unpaid taxes for each month or part of a month that a return is late, up to a maximum of 25%.
### What form should an individual file to request an extension for their tax return?
- [x] Form 4868
- [ ] Form 1040
- [ ] Form 1120
- [ ] Form W-9
> **Explanation:** Individuals should file Form 4868 to request an extension of time to file their tax return.
### Is there a penalty for not paying taxes by the due date, even if an extension to file has been granted?
- [x] Yes, there is a failure-to-pay penalty.
- [ ] No, the extension covers both filing and payment.
- [ ] Only interest is charged, no penalties.
- [ ] Penalties start after one-year delay.
> **Explanation:** An extension to file does not extend the time to pay taxes. The failure-to-pay penalty applies if taxes are not paid by the original due date.
### What is the difference between failure-to-file and failure-to-pay penalties?
- [ ] There is no difference, they are the same.
- [x] Failure-to-file is for not submitting tax returns on time; failure-to-pay is for not paying taxes due by the deadline.
- [ ] Failure-to-file is a flat fee, and failure-to-pay is a percentage.
- [ ] Failure-to-pay is penalized only after failure-to-file.
> **Explanation:** The failure-to-file penalty is imposed for not submitting tax returns on time, while the failure-to-pay penalty is for not paying owed taxes by the deadline.
### What is the usual maximum accumulation of the failure-to-file penalty?
- [x] 25%
- [ ] 50%
- [ ] 100%
- [ ] No maximum
> **Explanation:** The failure-to-file penalty typically maxes out at 25% of the unpaid taxes.
### Can the IRS waive penalties if a taxpayer can show reasonable cause for not filing or paying on time?
- [x] Yes
- [ ] No
- [ ] Only if the delay is less than six months
- [ ] Only applicable to businesses
> **Explanation:** The IRS may waive penalties if the taxpayer can show reasonable cause for the delay.
### Is interest charged on unpaid taxes on top of the failure-to-pay penalty?
- [x] Yes
- [ ] No
- [ ] Interest is included within the penalty.
- [ ] Only after a year of non-payment
> **Explanation:** Interest is charged on unpaid taxes, in addition to any failure-to-pay penalties.
### Which of the following can prompt a waiver of penalties by the IRS?
- [ ] Filing multiple late returns previously.
- [x] Showing reasonable cause for the delay.
- [ ] Requesting a waiver based on personal preference.
- [ ] Filing an extension to file late.
> **Explanation:** The IRS may waive penalties if the taxpayer can demonstrate reasonable cause for the late filing or payment.
### When are personal income taxes typically due?
- [x] April 15
- [ ] March 15
- [ ] June 15
- [ ] December 31
> **Explanation:** Personal income taxes are generally due by April 15. If April 15 falls on a weekend or holiday, the due date is the next business day.
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