What is the penalty for filing taxes late and what happens if you pay your taxes late?
If you look at the calendar, you'll notice that April 15-the dreaded tax day-has come and gone. Hopefully, you've already filed your taxes and either collected your refund or sent in what you owe. But if not, you'll still need to file your taxes and might suffer consequences from paying taxes late that are owed to the government.
Filing a Late Tax Return
So you missed the deadline, now what? It's best to file your taxes as soon as possible, whether or not you owe the government or will receive a refund check in the mail. If you can't file immediately, you'll want to file for an extension at the very least. An extension grants you the privilege of filing late without having to pay penalty fees. You can file an extension easily online with any of the best online tax software of 2015.
If you do not file for an extension when paying taxes late, you will owe penalties as much as 5 percent of the total amount owed each month that you are late. Late tax filing is not something you want to mess with, especially when you owe the government money versus receiving a refund check.
How to File Late Taxes
First, file for an extension on your taxes. Once approved, you'll have an extra six months to file your taxes. All extensions are due on October 15 of the current year. It's important to note that just because you get an extension does not mean you are allowed to wait to pay taxes that you owe. If you owe money, you're required to send in an estimate of what you owe in order for the extension to be approved.
There are two types of penalties from filing your taxes late. The first is a late payment penalty that you'll owe if you did not pay your taxes by the deadline of April 15. If you didn't get an extension, you'll also owe a late filing penalty. A late filing penalty is 5 percent of the taxes you owe each month plus interest, with the maximum late filing penalty fee being 25 percent of the amount owed.
What About a Late Tax Return?
If you expect a refund from the IRS, you're in luck. Even if you missed the deadline and are filing a late tax return, if you are getting a refund, you will not have to pay any penalty fees. An estimated 75 percent of tax filers get a refund, so if you fall in this camp, you can file your late taxes worry-free. Of course, you'll want to file as soon as possible so you can receive your refund check sooner rather than later.
Can I Pay the IRS in Installments?
Some people do not pay their taxes on time because they cannot afford to pay the IRS. If this is you, you'll want to file an extension, file your taxes immediately and call the IRS to discuss your options. You might be able to work out a payment plan, pay with a credit card or agree to an offer in compromise. An offer in compromise is where the IRS determines that you would be in a financial hardship due to paying your taxes and reduces the amount that you owe.
The IRS is willing to work with you as long as you are willing to work with them. If you missed the tax deadline, rectify the situation immediately by filing for an extension and filing your taxes as soon as possible.