Income tax deadline may feel like it’s approaching at rocket speed if you haven’t caught up on your bookkeeping. Don’t make the situation worse by filing late taxes as this will undoubtedly result in a penalty.
Hopefully, you’re not behind on your bookkeeping. But if you are, and expect that you may be filing late taxes, here’s information regarding the penalty you may have to pay.
The Consequences Of Failing To File
The IRS may impose penalties if you fail to file your taxes by the deadline. You should be aware that this penalty applies even if you are due a refund or don’t owe taxes. Also, the IRS late filing penalty is separate from the penalty for not paying taxes on time. If left unresolved, both penalties can add up and create financial burdens.
What Is The Filing Late Taxes Penalty?
If you miss the filing date for your federal return, for example, you’ll probably start panicking. But take a deep breathe, calm yourself so that you can think clearly. Late filings happen, and you can fix things, but because you’re filing late taxes, you’ll have to pay a penalty or fees.
As a result, there are two possible penalties; a late payment penalty and a late filing penalty. How late your tax filing is and how much you owe the IRS are the determining factors for the penalty amounts. Obviously, the later the filing and the more you owe, the more expensive the penalty will be.
Not paying your business taxes on time is 0.5% of the unpaid tax amount every month.
Penalty for not filing your taxes is 5% of the unpaid taxes for each month your taxes remain unpaid.
If both penalties apply in the same month, the maximum penalty is 5% per month. This breaks down into a 4.5% failure-to-file penalty and 0.5% for a failure-to-pay penalty. However, each of these penalties will at most be 25% of the total tax you owe. And it takes a while to reach that point.
How To Minimize or Avoid Penalties
We all know that life gets in the way sometimes. But consider the following ways to minimize the IRS late filing and payment penalties.
- File an extension. This must be done before the deadline passes and payment is still due by April 18.
- File your taxes even if you can’t pay them right now. The penalty for missing federal tax filing is larger than the penalty for missing the payment. File your income tax return with the IRS and avoid the larger of the two penalties. There are many ways to sort out how to pay your taxes.
- Get help to file as soon as possible. If you missed the deadline, penalties are growing every month. File as soon as possible, even if it means paying for help from a tax professional. They can help you sort out the numbers and get your tax forms prepared.
In Conclusion
Not paying or filing your taxes can be costly. So, to avoid filing late tax penalty or fee, file your taxes as soon as possible. Whatever reason you had for missing the April due date, you can’t go backward. Instead, focus on the future and what you can control today.
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