Is the April 18 tax deadline keeping you up at night? If you haven’t filed yet, you may be burning the midnight oil gathering your documents and filing online. Keep up the good work and follow these steps to avoid late penalties from the IRS.
If you can, file and pay your taxes on time.
If you can’t file your return on time, file for a tax extension to avoid the late filing penalty.
If you’re expecting to owe money, pay all or as much of your balance as possible to reduce your late payment penalty and interest.
Late Filing Penalty Facts
If you don’t file your taxes or request a tax extension using Form 4868 by April 18, you’ll get hit with the late filing penalty by the IRS. It’s important to file on time or file an extension, even if you can’t pay on time. The late filing penalty is much higher than the late payment penalty.
The late filing penalty is normally 5% of unpaid taxes for each month or portion of a month that your return is late. However, this amount will not exceed 25% of your unpaid taxes. For example, if you owe $1,000, your late filing penalty won’t be more than $250. Also, if you file more than 60 days after the due date, the minimum penalty is 100% of your unpaid taxes or $135, whichever amount is smaller.
Note: If you file after Tax Day and are owed a refund, congratulations! You won’t face the late filing penalty. The IRS gives you up to three years to claim your refund money.
Late Payment Penalty Facts
If you owe money to the IRS and don’t pay the full amount by April 18, you’ll face the late payment penalty. This penalty begins accruing on April 19 and is normally 0.5% of unpaid taxes for each month or portion of a month that your taxes remain unpaid. Like the late filing penalty, this amount will not exceed 25% of your unpaid taxes.
If you requested an extension by April 18 and paid at least 90% of your taxes, the late payment penalty may not apply to you. Just be sure to pay your remaining balance by your extension due date. If you are financially unable to pay your tax debt right away, you can make monthly payments to reduce or eliminate penalties. Keep in mind, you’ll owe interest on any unpaid balance after April 18.
Note: If you have a legitimate reason for late filing or late payment, the IRS will consider reasonable causes that prevented you from meeting these tax obligations. Learn more here.