We all know that taxes are due on April 15th every year, but what happens if you can't file your return or pay your taxes on time? There are penalties and interest charged for late filing or payment of tax liabilities. To avoid these fees and costs, it is important to file your taxes by the due date even if you cannot pay in full. Filing an extension may reduce or eliminate the penalty associated with a late filing. Let’s explore the consequences of not filing your taxes and how to avoid them.
Penalty for Late Filing:
The penalty for not filing your tax return is 5% of the amount you owe for each month it is late, up to 25%. This penalty is based off of the total amount owed; therefore, if a payment plan is available, it may be beneficial to set one up as soon as possible so that this fee does not accumulate.
Penalty for Late Payment:
The cost for paying taxes late depends upon how much money you owe and when you file your return. If you owe $1,000 or more when you file after April 15th, then the IRS will charge 0.5% per month (up to 25%) until the balance is paid in full. If you don’t file a return at all, then the IRS will charge 0.5% each month until either 20 days after they notify you that a tax return must be filed, or until October 15th (whichever comes first). After October 15th the rate increases to 1% per month until the balance is paid in full.
Filing an Extension:
Filing an extension gives taxpayers six additional months to complete their returns—until October 15th instead of April 15th—without incurring any penalties from failing to meet their original deadline. However, keep in mind that filing an extension does not extend the payment due date; any tax owed must still be paid by April 15th in order to avoid penalties and interest charges from accumulating on unpaid balances.
It's important for taxpayers to understand what can happen if they fail to file their returns or make payments by their due dates –– penalties and interest charges can quickly add up! The best way to avoid these consequences is simply by filing an extension if needed and paying as much as possible by April 15th. Doing so will help you stay on top of your tax obligations without incurring hefty fines and extra costs!