The good news is that if you file your federal tax return late and you don’t owe tax with the return you will not owe a penalty. Keep in mind that if you file later than 3 years after the due date of the tax return the IRS will keep your refund if one was due you.
IF YOU DO OWE TAX
The bad news is, if you file your federal tax return late and you DO owe tax, penalties will apply and interest will be charged.
Here are the facts:
- There two penalties –
- Failure-to-file penalty for filing late – usually 5% of the unpaid taxes for each month that a tax return is late, up to 25% of your unpaid taxes.
- Failure-to-pay penalty – generally .5% per month of your unpaid taxes. They charge you for each month your taxes remain unpaid. The penalty can get as high as 25% of your unpaid taxes.
- File your tax return even if you can’t pay all the tax due. You will avoid the failure-to-file penalty.
- Failure-to-pay penalty may not apply if you requested an extension of time to file by the due date of your tax return and you paid in at least 90% of the taxes you owed. However, you have to pay the remaining taxes you owe by the extended due date. (Example, your total tax owed for 201X was $1,000. You paid in $900 and you file for an extension by April 15th. The extension is until October 15th and you file by October 13th and include the $100 still owed. You will not have to pay the failure-to-pay penalty.
- Reasonable cause – if you can show, and the IRS accepts, the reason that you could not file or pay on time then the IRS will waive the failure-to-file and the failure-to-pay penalties.
WAYS TO PAY THE TAX YOU OWE
- By check or IRS Direct Pay
- Get a loan and pay off the IRS. It’s better to have to pay someone else back than the IRS. It usually will cost less.
- By debit or credit card. (Fees apply)
- Set up an Installment Agreement with the IRS.
This is an overview of what happens when you file and pay your federal tax return late. For more information, contact us at 508-746-4663.