If you send in your taxes after the deadline, you could be subject to two different penalties. The Internal Revenue Service can hit you with a “failure to file” penalty for both not filing and not paying by the April 15 deadline. If you file, but don’t pay, sending in a tax return still leaves you subject to penalty. But if you’re getting a refund, the IRS won’t penalize you for letting Uncle Sam keep your money for a while longer.
Organizing a financial plan and budget for tax season is critical for avoiding late fees – but if you find yourself up against the deadline, here’s some information about what you could face.
Whether or not you file your tax return, if you owe taxes and don’t send payment by April 15, the IRS will hit you with a failure-to-pay penalty and with interest. The penalty can be as much as 25 percent of your unpaid taxes! The failure-to-file is roughly an additional 5 percent of the unpaid taxes for each month you’re late. If you don’t have the funds to pay your taxes, you have the option to file and not pay, possibly reducing your penalty fees. You can also file for an extension.
Sometimes, you can get extra time to file your taxes. The IRS will usually give you extra time to file if you file an extension by April 15, although you will still have to pay what you owe to avoid the failure-to-file penalty. If you will get a refund when you file, the IRS doesn’t levy any penalty for late filing. However, if you don’t file within three years of the due date, you could lose your right to a refund. Finally, if you have a good reason, such as being in a disaster or serving in the military in a combat zone, the IRS can give you a penalty-free extension.
Not paying your taxes leaves you open to IRS collections. The IRS will send you a bill for what you owe if you file a return without paying, or it will send you a bill for what it thinks you owe if you don’t file at all. Although the IRS doesn’t report late payments to credit bureaus, it can eventually file a federal tax lien against you, which will show up when you, or any creditor, checks your credit report. With the lien, the IRS can seize your accounts or garnish your wages until it is paid back.
About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.