March 13, 2017 by Ed Becker
If you have never been down to the wire of the tax filing deadline (usually April 15th), you may not understand the anxiety. Tax season is either a great time of year, for those getting a refund; or a major stressor for those who owe taxes. The IRS has more power to instill fear or joy in people than most any other single entity on earth, well maybe just in America.
If the above is true, why would anyone not have their tax return completed and filed on time? There are some cases of valid reasons that cause late filing, but many cases can be blamed on procrastination or lack of organization. People or businesses that owe a tax bill may put off filing until the last minute so they can keep their money longer, or they may not have enough saved to cover the owed taxes.
If you believe, that you might be late filing your return, and you know you will owe taxes, do not hesitate to file for an extension! The penalty for late filing is worse than for late payment. For 2017 tax season the filing deadline is April 18th. When you file an extension, you have 6 months, till October 18th, to submit your return. Filing for the extension prevents you from the late filing penalty, if your return is filed by the extension deadline.
Filing late without an extension or past the extension deadline can cost you ten times more than the late payment penalty. Meaning that even if you cannot pay your taxes due, file your return on time! Or at the very least file for the extension and get the return filed as soon as possible. You can also amend your return later, if necessary.
The late filing penalty is 5% of the additional taxes you owe for every month or partial month that your return is late, up to a maximum of 25%. If your return is filed more than 60 days late the minimum penalty is the smaller of $135 or 100% of your unpaid taxes.
If you are stretched too thin and are not able to pay your tax bill on time, your best option is to pay as much as you possibly can. Then you are only charged a penalty on the unpaid portion. The late payment penalty is ½ of 1 percent on the balance owed for each month or partial month up to 25%.
It is important to file for that extension even if you are unsure that you will be able to file on time. If you file the extension and cannot pay, your penalty is just ½ percent on the balance due, each month. Basically, the IRS wants you to file on time, even if you cannot pay on time. If you are not able to file on time, file for the extension. Then, if you can pay any of the projected taxes due you would only have penalties on the unpaid portion and no late filing penalty at all.