13 May Penalties for Submitting Your Taxes Late
The deadline for filing your federal income tax return is April 15, but you can also file an extension with the IRS. If you miss the deadline completely, you’ll get a penalty of 5% of any tax you owe. If the return is more than two months late, this penalty could increase. If you missed the deadline but don’t owe any tax, they will withhold your refund until you file.
If you don’t think you can get all the necessary documents and submit your federal income tax return before the deadline, you need to file an extension with the IRS. The extension will postpone your filing due date for six months to October 15, but you still have to pay any tax you owe by April 15 or come up with a payment plan with the IRS. If April 15 comes and goes, and you haven’t contacted the IRS at all, you will pay a penalty.
If you’re expecting a tax refund but don’t file your federal income tax return on time, you won’t be charged, but you won’t get the refund until you file. However, if you owe taxes and don’t file your return, the IRS will start a running tab in your name. You’ll be charged 5% every 30 days for any unpaid tax you have to report on your return.
Even if you file a few weeks after the deadline, the penalty will still apply for the full month. If your return is filed more than two months after the due date, you will receive a minimum penalty of 100% of the tax that needs to be paid on your return or $435, whichever is less, according to the IRS rules. You will also have an interest accruing on your balance.
If you can’t afford to pay your tax bill entirely before the deadline, don’t ignore the situation. The IRS still offers reasonable payment plans at much more affordable interest rates than most banks. You may even be able to pay back less than you owe, which is called an offer in compromise, or ask for a deferment until you are able to pay. Offers in compromise and requests for deferment include extra paperwork and have to be approved by the IRS.
You have a few other options available, such as installment agreements and credit card payments. You can also file your return and wait for the IRS’s bill, but don’t be surprised if it includes interest and penalties.
If you do not pay the complete amount you owe by the tax deadline, and even if you file an extension, you will receive a penalty of 0.5% of your balance due monthly after the deadline. The amount of your penalty will not be more than 25% of your back taxes.
If you do not pay the full amount due, you will also owe interest. This interest rate is determined quarterly by the federal government. Currently, the 2020 interest rate for underpayment of taxes is 3%.