The April 15 Federal Income Tax filing date has come and gone. If you failed to get your return filed on time and you are owed a refund there will not be a penalty if you file a late tax return. But if you owe taxes and you have failed to file an extension and pay the estimated tax on time you will probably be assessed penalties and interest on the taxes you pay late. Here are eight facts that you should know about these penalties.
- If you file late and owe federal taxes two penalties may apply. The first potential penalty is the failure-to-file penalty for filing your appropriate forms late and not asking for an extension. The second penalty will be the failure-to-pay penalty for paying your estimated taxes due late even if you couldn’t get the forms done on time.
- The failure-to-file penalty is much more than the failure-to-pay penalty. In most cases it’s 10 times more so if you can’t pay what you owe by the due date you should still file a tax return or extension on time and pay as much as you can. The IRS will work with you to help resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.
- The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
- If you file your return more than 60 days after the due date or extended due date without an extension the minimum penalty for late filing is the smaller of $135 or 100% of the unpaid tax.
- Failure-to-pay penalty is generally .5 percent per month of your unpaid taxes. It applies for each month or part of the month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
- If the 5 percent failure-to-file penalty and the .5 percent failure-to-pay penalty both apply in any month the maximum penalty amount charged for that month is 5 percent.
- If you requested an extension of time to file your return by the tax due date and did pay at least 90 percent of the taxes you owe you may not face the failure-to pay penalty. However you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
- You will not have to pay a failure-to-file or failure-to-pay penalty if you can show a reasonable cause for not filing or paying on time.
Of course all of these issues can be avoided with some planning ahead and the help of a reliable tax accountant. For more information on the failure-to-file penalty and failure-to-pay penalty or filing your taxes click here and Lindemeyer will be glad to help you assess your tax filing needs.