It’s Better To File Late Than Not
You might think, I missed the deadline already, so what are a couple of extra weeks? But its best to send your tax return as soon as possible . So try to file the next day or as quickly as possible.
If your adjusted gross income is $73,000 or less yearly, you can use one of the IRSs free federal tax options, including free tax-preparation software, to file your return online. If you make more than $73,000, you can still file online using the IRSs free electronic forms, but youll need to know how to do taxes if you choose this route.
Why Do People File Their Taxes Late
According to surveys, tax procrastination is a huge reason why many Americans file their tax return late or at the last minute each year. As many as 33% is the estimated number of late filers. What were their reasons for procrastination? First, about 40% of those filing late reported that they found their taxes too time-consuming, 22% found it too stressful, 22% want to make sure its correct, 10% feel no rush because they wont be getting a refund, and 6% are worried theyll owe money.
In fact, many people miss the tax deadline, resulting in a late payment penalty. The minimum penalty for a failure to pay the penalty timely is 5% of unpaid taxes for each month or portion of the same month a tax return is late is the Failure to pay Penalty. The maximum late filing penalty cant exceed 25% of overdue taxes. In addition, the IRS interest rate is 6% per year, compounded daily. Therefore, the failure to file can cause a significant pay penalty rate. Moreover, your unpaid tax owed will significantly increase.
Its interesting to point out here, too, that, although many were afraid to file or found it too time-consuming, the average federal refund in 2020 was $2,707. Thats almost 3 grand that the government has likely overtaxed you throughout the year, and they get free reign to spend that money interest-free until you do your taxes.
How Are Stimulus Payments Tied To 2021 Tax Returns
If the IRS owes you money for the third stimulus check due to a new qualifying dependent you gained in 2021, you can file for that payment through a recovery rebate credit when you file your taxes. You could get up to $1,400 for your dependent — that includes a new baby born or adopted. Keep an eye out for Letter 6475 from the IRS as it will have all the details you need about last year’s stimulus check when you file.
As for the first two stimulus checks, if you didn’t receive either check or received less than you qualified for, you could still be eligible to claim the money through a recovery rebate credit. You’ll either need to file a 2020 tax return if you haven’t yet, or amend your 2020 tax return if it’s already been processed.
At the end of 2021, the IRS still had some 6 million unprocessed tax returns to go through and advises you not to file a second return if your 2020 tax return still hasn’t been processed yet.
Between the child tax credit and child care expenses, you could get a lot of money back this year.
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How To File A Tax Extension
If you’re planning to file a tax extension this year, you’ll need to submit Form 4868 to the IRS either by paper or electronically using e-file before the April 18 deadline. Note that you’ll still have to pay all or part of your estimated income tax due using Direct Pay, the Electronic Federal Tax Payment System or using a debit or , and note that you’re filing for an extension.
Some taxpayers are automatically granted more time to file. This includes military personnel who are serving in a combat zone or persons in federally declared disaster areas. US citizens who live outside the country have until June 15 to file.
What Happens If You Pay Taxes Late
Whether you file your taxes or not, you owe the government money, and the government expects to be paid on time. That means failing to pay your taxes on time can result in penalties, as well. Whether you submit your taxes or not, the IRS will send you a notice for what you owe. Failing to pay that amount by the date they are due, April 15, will result in daily and monthly penalties.
Each month that you fail to pay your taxes in full will result in the IRS assessing a penalty of 0.5 percent of your total tax liability. This will continue each month, maxing out at 25 percent of your total owed tax bill.
There is also interest owed on any outstanding taxes, which begins to accrue the first day that your taxes arent paid and compounds daily until the bill is paid in full. The interest will be determined by the current federal short-term interest rate plus an additional 3 percent. The short-term rate changes every three months, so your interest rate may go up or down depending on how long it takes to pay your taxes in full.
Paying down your owed taxes creates less money for the government to charge interest on, resulting in the failure to pay penalty being less severe. However, allowing it to accrue long term can result in steep and significant fines. The IRS can also seek to have people jailed for failing to pay their taxes, but it is extremely uncommon for that to happen particularly if the tax bill is not well into the hundreds of thousands of dollars or more.
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Can I Pay My Tax In Installments Over Time
If you find yourself owing more than you can afford, you should still file a return.
- Even if you don’t enclose a check for the balance due, sending in your return protects you from the late-filing penalty that otherwise would keep digging you deeper into a hole.
- Attach a Form 9465 Installment Agreement Request to your tax return asking the IRS to set up a monthly payment plan to pay off what you owe.
About 2.5 million taxpayers are paying off their bills under such an arrangement and recently the IRS made it easier to qualify. In the past, before the IRS would okay an installment plan, the agency demanded a look at your financesyour assets, liabilities, cash flow and so onso it could decide how much you could afford to pay.
- That’s no longer required in cases where the amount owed is under $10,000 and the proposed payment plan doesn’t stretch over more than three years.
- You can also now apply online for the installment agreement. More details are available on the IRS website
Don’t think the IRS is a patsy, though. You may be better off if you can borrow the money to pay your bill, rather than go on an installment plan which means, effectively, borrowing from the IRS.
How Much Money Will I Owe For Filing Taxes For My Tax Year Late
If you file your taxes late or are subject to late filing, you wont just receive a friendly reminder email. Its called a Failure to File penalty, and it can be a doozy, especially if you have a large amount of tax owing. This amount is a percentage of the taxes you would have owed if you filed on time and how late you filed your taxes.
In each case, when you miss the tax filing deadline, you still have to pay taxes. In this case, you should talk directly to the internal revenue service or contact a tax professional to ensure you get a tax extension or a reduction in your penalty amount.If youve since filed an extension of your due date and you still didnt file in time, that time factor counts from the original filing date not the extended one.
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Irs Late Penalties And Interest
Although the IRS sets an annual deadline for submitting tax returns, taxpayers can still submit their tax declaration after it passes. If the individual does not owe any taxes and are due a refund, they have a maximum of three years to claim it, and must do so before the April tax deadline of that year. This maybe the case for families that failed to claim the 2021 Child Tax Credit and have yet to file a tax return.
However, if you owe taxes the IRS encourages you to do so as soon as possible to limit penalties and interest. Taxpayers that find themselves in this situation could face a Failure to File Penalty, if you havent filed for an extension, and a Failure to Pay Penalty, as well as interest on both. The amount will accrue the longer you delay settling with the IRS.
Consider Using A Tax Software To Stay On Top Of Future Tax Seasons
If you find yourself missing tax deadlines, youâre not alone.
People might miss the deadline because theyâre not aware itâs coming, or because they think they shouldnât bother filing if they canât afford to pay . Or maybe they just find taxes intimidating â something thatâs easier to put off.
At Keeper, weâre all about kicking these problems to the curb. Weâre here to help self-employed people feel confident and in control of their taxes, so that next time, you get them done in plenty of time.
Not only does our software help you save money when you file, it also connects you with specialists who can help you decode technical tax lingo in a jiffy. Sign up, and youâll be able to text with a tax assistantwho can answer your questions and help you find write-offs without crossing the line â protecting you from mistakes, delays, and missed savings.
Paul Koullick
Paul Koullick is the co-founder and CEO of Keeper. His writing on tax topics has been featured on Startup Nation, Freelancer Union, and Tweak Your Business, among other places. Paul has worked in the tax and finance industry for nearly a decade. His previous experience includes building the tax product at Stride Health and Square. Paul holds an A.B. from Harvard University in Applied Math and Computer Science. In his free time, he loves to go jogging and play chess.
Find write-offs.
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Are Child Care Expenses Included With Tax Refunds This Year
The child care tax credit has been expanded for 2021 tax returns. The amount of money you can get back for expenses you paid for child care or dependent care has increased significantly. That means you could potentially receive up to $8,000 for one child or up to $16,000 for two or more kids.
Here’s what counts as an expense: day care, babysitters, transportation to and from care providers, day camp, and before- and after-school programs. The amount of money you’re eligible to get reimbursed for will be sent with your tax refund.
Request Your Tax Refund Before You Lose It
Itâs a good idea to file your taxes after the due date even if you expect a refund, but you donât want to wait too long.
The IRS usually allows you three years from the due date of your tax return to request a refund. After this time, youâll forfeit your tax refund. Your 2021 tax return was due on April 18, 2022, so you have three years from that date to request a refund. If you donât file your 2021 return by the April tax deadline in 2025, youâll lose your tax refund. The U.S. Treasury will own your money.
Note that if you donât owe money to the IRS but instead are owed money, the tax agency may still expect you to file a return.
If youâre missing any tax documents from a prior year, you can request them from your employer, bank or other third party, such as an educational institution or student loan provider. You can also request missing tax forms from the IRS by using the Get Transcript Online tool or creating an IRS online account.
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Can’t File Your Tax Return By Midnight Here’s How To File A Tax Extension
Today’s the last day to file your tax return on time. An extension gives you six more months and avoids late penalties.
Income tax returns are due tonight by midnight in your local time zone. That means it’s your last day to submit your return and file your taxes on time to receive a prompt tax refund. Letting the deadline pass will slow down your refund and could lead to fines and penalties if you owe money.
If it isn’t possible to file your tax return by tonight’s deadline, you’ll want to file a tax extension to give yourself another six months. Along with completing your tax return, online tax software can also help you file a tax extension.
While an extension provides extra time to file your return, most tax experts advise against it unless you’re missing necessary tax information or simply unable to file taxes because of illness, travel or other conditions. Read on to learn how to file a tax extension and to find out more about the money you could be delaying if you do. For more, here’s how to file your taxes for free and track your IRS tax refund after you file.
Failure To File Penalties
People sometimes avoid filing tax returns because they’re worried they can’t pay what they owe. That’s a mistake, said E. Martin Davidoff, partner at accounting firm Prager Metis.
“What happens is, people say, ‘Oh my gosh, I can’t pay so I’m not going to file.’ That’s the worst thing in the world,” Davidoff said. “If you don’t file, you’re going to be hit with much larger penalties.”
The IRS’ penalty for not filing is 5% of the amount of tax owed, imposed every month the tax return is late.
“If a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less,” the IRS notes.
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Penalties Interest And Collection Fees
When a tax return is filed after the due date or the tax due is paid late, penalty and interest charges may be assessed. In some instances, we may also impose collection fees.
Interest
We charge interest for every month your tax remains unpaid.
The rate is calculated as: Prime Rate + 3%, compounded annually. At the end of each calendar year, any tax, penalties, and interest remaining due will become part of the balance on which interest is charged. For information on interest rates, see Technical Bulletin TB-21.
Late Filing Penalty
When you do not file a return by the due date or extended due date we may assess a Late Filing Penalty. The Late Filing Penalty is 5% of the tax due for each month the return is late. The maximum penalty for late filing is 25% of the balance due. We also may charge $100 for each month the return is late.
Late Payment Penalty
In addition to interest, we may also charge a Late Payment Penalty of 5% of the tax due.
Collection Fees – The Collection Process
Referral Cost Recovery Fee
A Referral Cost Recovery Fee is added to your tax liability if your tax bill is sent to our collection agency. This fee is in addition to any interest or penalties.
Effective January 1, 2022, the fee is 11%.
Delinquent Returns
You will also be charged a Referral Cost Recovery Fee for delinquent tax returns.
Cost of Collection Fee
If a certificate of debt is issued, a fee for the cost of collection of the tax also may be imposed.
Applicable Laws and Rules
What Are The Fees And Penalties For Filing Taxes Late
There are two basic penalties that the IRS charges for filing taxes late when you owe money: a failure-to-file penalty and a failure-to-pay penalty. On top of that, you’ll also pay interest on the amount you owe.
The failure-to-file penalty hurts the most. It’s generally 5% of the amount you owe for each month or part of a month that your return is late, with a maximum penalty of 25%. If your return is more than 60 days late, the minimum penalty is $435 or the balance of your taxes due, if less than that.
The failure-to-pay penalty will also cost you money, but not nearly as much — a big reason to file an extension on time even if you can’t pay anything. This penalty is usually calculated at 0.5% of any taxes owed that aren’t paid by the deadline. The IRS again charges the penalty for each month or part of a month that your payment is late, with a maximum 25% penalty total.
The IRS also charges interest on late taxes. Determined by adding 3% to the short-term federal interest rate, the IRS interest rate is currently 4%. That rate is adjusted quarterly, and interest is compounded daily.
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Penalties For Filing A Tax Return Late
If you don’t owe the IRS money and are late submitting your tax return, here’s some good news: You won’t face a penalty for filing your taxes past the deadline. But if you do owe the IRS money, it’s a whole different story. Miss the deadline, and you’ll face a late filing penalty equal to 5% of your unpaid tax bill for every month your return is late, up to a maximum of 25% of what you owe. That penalty will start to accrue the day after the tax filing deadline, which, for this year, is April 18, so if you owe a lot of money, being even a few days late could cost you. Furthermore, if you owe money and file your return more than 60 days after the deadline, you’ll face a minimum penalty of $135 or 100% of your unpaid tax bill — whichever is smaller.
Image source: Getty Images.
Keep in mind that the late filing penalty can be far worse than the late payment penalty –10 times worse, in fact. If you file your return on time but can’t pay off your tax bill in full , you’ll face a penalty equal to 0.5% of what you owe for every month your taxes go unpaid, up to a maximum of 25%. So if, for example, you owe $5,000 in taxes and file a return on time but don’t pay your bill for six months, it’ll cost you $150 in penalties. However, if you owe $5,000 and don’t pay or file a return for six months, it’ll cost you $1,500. Ouch.
