Failing to file your federal income tax return by the filing deadline could be costly if you owe the IRS money. You could be assessed penalties and interest on the money you owe and this can really add up over time. If you are due a refund from the IRS there is no penalty for filing late, however, you should be certain that you are actually due a refund to avoid any issues.
There is a 5% late filing penalty for all monies owed each month and part of a month that the debt goes unpaid. These charges are accrued for a period of 5 months and the cap on this penalty is 25% of the unpaid balance.
If your unpaid balance is 60 days or more past due to an additional minimum fee of $205 or 100% of the unpaid balance will be assessed whichever is the least of the two amounts. The minimum amount that is charged however does not lessen the impact of the 5% per month that has accrued for 5 months which can be significantly greater.
In addition to the previously mentioned charges, an additional 0.5% late payment penalty will be applied to your unpaid tax bill plus any interest every month and part of a month that the balance goes unpaid.
The deadline to file your taxes for 2018 is April 17th and if you request an extension for six months, the filing deadline is October 15.
Note that requesting an extension will not offset your obligation to pay. You must pay approximately 90% of your owed taxes for 2017 to avoid any penalties and interest.
In order to avoid paying penalties and interest, it is suggested that you try to avoid any penalties by filing your tax return on time by the filing deadline. Even though you may owe the IRS and can’t pay right away, it is best to file your return by the deadline to avoid penalties, if not request an extension.
If you request an extension you may offset the late payment penalty only if you have already paid at least 90% of what you owe for your 2017 tax return. The remaining 10% can be paid by the extended filing date.
If you foresee that you are going to be late paying your taxes, it is suggested that you try to pay some of the money when you file your return. This reduces the number of penalties and interest because it will be applied to a lesser amount.
The final suggestion is that if you are going to file a late return and can’t pay what you owe; if you can show ‘reasonable cause’ why you filed late and can’t pay your taxes, the IRS will not charge you with penalties. However, ‘reasonable cause’ is not something that is outlined or defined by the IRS and they make their decision based on each individual case.
If you owe less than $50,000, you may be able to request to pay the taxes you owe in installments or work out a payment agreement with the IRS. You may want to speak with a tax attorney about working out agreements with the IRS to pay taxes owed. If possible pay your taxes in full by the filing deadline to avoid any penalties and interest.
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