If you still haven’t filed your tax return, you may be panicking as time ticks down. This year, the District of Columbia Emancipation Day holiday meant IRS workers got Friday off and pushed back the tax filing date from the 15th to the 18th.
You have until midnight to postmark your federal tax return to avoid the late filing penalty. Many U.S. postal service locations will be open late tonight to accommodate a late filing.
If your return is somewhat simple, this means you still have an evening. If you owe a significant tax bill, you might not think it is important to file before the deadline. This is wrong. In this post, we will explain why and what your options are to avoid paying extra dollars to the federal government.
Two penalties: Avoid the more expensive
The IRS slaps two penalties on those who delay. Here are the two penalties and how they tack additional cost onto your tax bill:
- Failure-to-file penalty – five percent of your unpaid tax bill for each month or part of a month that the tax return is late.
- Failure-to-pay penalty – 0.5 percent of the tax liability for each month you are late paying.
The maximum penalty that you pay for combined penalties is 5 percent each month, but by filing on time you can reduce your penalty assessment by 4.5 percent each month. The filing penalty has more teeth and is designed to encourage you to file a timely return even if you can’t pay the full tax bill.
If you just didn’t have time to get your tax documents in order, file for an extension.
You can file Form 4868 through the IRS website. Using the free file service means it will not cost you anything. This will give you an automatic six month extension.
Act fast, because you are down to hours. Filing for an extension will not avoid the failure-to-pay penalty if you owe taxes, but it does eliminate the more expensive penalty. If you have not filed for several years, now is the time to speak with a tax attorney to come back into compliance.
Source: CBS MoneyWatch, “Still not ready to file your tax return? Do this now,” Ray Martin, Apr. 18, 2016