If you missed the April 15, 2014, deadline for your 2013 individual tax returns and owe money or know you generally owe money each year, try to file sooner rather than later. Especially, if you didn’t have your tax preparer file an extension or drop Form 4868 (the federal individual extension form) in the mail yourself on or before the deadline. Many taxpayers don’t realize that where the Internal Revenue Service (IRS) penalizes the most on individual tax returns is failure-to-file. The failure-to-file penalty is 5% per month or part of a month on any unpaid tax liability, but fortunately the maximum failure-to-file penalty caps out at 25%. If an extension was timely filed, this penalty is postponed until after October 15th, but otherwise it started April 16th.
Another consideration is the failure-to-pay penalty, which starts getting tacked on April 16th no matter what. An extension only extends the time to file a tax return not the time to pay. The failure-to-pay penalty is .5% per month or part of a month past April 15th and can also not exceed 25%. The IRS also charges interest on any unpaid balance, which is often changed, but the current rate is 3% per year.
The most important thing to take from all this is don’t put off paying your income taxes. The interest and penalties charged for postponing filing and paying really can add-up to be a substantial amount. We have the following tips and suggestions to help out our current and potential clients:
1. File and pay in as much as you can as soon as possible. This will minimize the interest and penalties you incur.
2. E-file your returns when you do file because processing time is much quicker on electronic returns.
3. If the taxes you owe really are just too much for you to handle right now, consider setting up an installment agreement with the IRS. This can be done by filling out and mailing in Form 9465, Installment Agreement Request, or use the Online Payment Agreement Tool on the IRS website.
Thanks again for checking out our blog, and we hope anyone reading this is having a great weekend. Check out the following link for some additional information on the topic discussed in this post –
http://www.accountingtoday.com/news/tips-for-late-taxpayers-70359-1.html
