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With technology comes the annual essential maintenance needed to keep the process running smoothly. It’s no different for the IRS after the October 15 deadline. For the IRS, this period is known as the e-filing shutdown, often from late November until mid-January. With this in mind, you may wonder how this will affect you as a taxpayer. Keep reading to understand more of what happens.
Why does the IRS shut down e-filing?
The IRS e-filing shutdown happens mainly to maintain the current system and include updates as the tax laws change. Tax law is subject to change annually, even more so in the wake of the 2024 federal elections. These few months are crucial to ensure proper integration of new legislation and adjustments to deductions and credits. Without this process, there could be issues with processing tax returns for the new tax year.
Another reason for these yearly shutdowns is to improve security. Financial data is extremely sensitive, and it becomes a prime target for cybercriminals during the tax season. Therefore, the IRS uses these three months to enhance security measures.
Additionally, this maintenance is an excellent time for the IRS to test its systems to ensure that many people can submit their tax returns simultaneously. Once the maintenance has been completed, the e-filing system should be more secure and better for the next tax season.
When does the IRS shutdown happen?
Often, every deadline is shared well in advance, but this is not the case with the IRS shutdown. In addition, the deadline does not fall on the same date every year. However, it can be roughly predicted from prior years. What is known is that the IRS shutdown usually occurs around the third week of November. For instance, in 2023, the shutdown happened on November 18.
How does the IRS shutdown affect taxpayers?
The shutdown has several different effects on people who are filing taxes. The major impact is the time it takes to file U.S. taxes. For most of the year, you can use online tax services to file your U.S. taxes, making it much easier to submit your return. But when e-filing becomes unavailable, taxpayers must file their tax returns on paper; this takes significantly longer processing.
People who rely on refunds for financial planning will likely face delays as it can take weeks to process your return. Furthermore, this delay only worsens if you make a mistake and need to submit an amended return.
The shutdown adds a lengthy workload for businesses and other tax professionals. Many businesses use fiscal deadlines to file, and tax professionals work with quarterly filing, ultimately slowing operations.
Lastly, taxpayers will likely encounter penalties for missed deadlines. Therefore, awareness of the IRS shutdown is crucial for filing on time and lessening penalties.
For more information, head over to IRS activities following the shutdown.
There are penalties for missing deadlines.
If you miss the deadline for e-filing, you will still have to file to lessen any penalties. If you do not file before October 15, you could be subject to these penalties:
Failure-To-File Penalty
• Imposed if you don’t file your tax return by the deadline.
• Generally, it amounts to 5% of the unpaid taxes for each month the return is late, up to a maximum of 25%.
Failure-To-Pay Penalty
• You may incur this penalty if you owe taxes and fail to pay them on time.
• It is typically 0.5% of the unpaid tax for each month it remains unpaid, also capping at 25%.
Interest On Unpaid Taxes
• The IRS charges interest on the unpaid tax from the due date until payment is made.
• The interest rate varies quarterly, based on the federal short-term rate plus 3%.
Your responsibility is to file U.S. taxes on time. Even during the IRS shutdown, you must file, even if you must send physical documentation.
Prepare for the IRS e-filing shutdown.
If you want to avoid complications when filing your U.S. tax return, filing it as soon as possible is highly recommended. This could be for the April, June or October deadline, but make sure it is filed beforehand. Submit your tax return before the shutdown to ensure you allow yourself a smooth process free of potential delays. Otherwise, submitting your tax return after the shutdown becomes incredibly time-consuming with penalties.
Your only option for submitting your tax return after the shutdown is to mail it. If you need to file this way, a good rule of thumb is to ensure your tax return is tracked via a postal service, with an additional requirement to sign for confirmation.
In addition, staying informed about IRS announcements regarding shutdown dates and updates can only benefit you. Knowing the shutdown will happen allows you to make the best filing decisions. Additionally, consulting a tax professional is recommended if you need help with how to proceed during the shutdown.
File before the IRS shutdown.
E-filing is the most convenient way to submit your tax return, but if you cannot do so before e-filing shuts down, you can still submit your tax return via mail. Make sure to be aware of any announcements from the IRS; it will ensure you are prepared for tax filing.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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