(But it’s also much better to be just a little late than a lot late)
The October 15th deadline for 2013 individual tax returns that were on extension has come and gone. Hopefully, you got your tax return filed on time. But what happens if you didn’t?
Penalties (cue ominous music)
If you don’t file your taxes on time, the IRS can slap you with a failure-to-file penalty of 5 percent of the tax you owe, for each month or partial month that you’re late. If you let things go for a while, this penalty can run up to 25 percent of the tax you owe the IRS.
Also, if your return is more than 60 days late, there’s a minimum penalty of $135 or 100 percent of the unpaid tax, whichever is smaller.
But What If I Forgot To Pay My Tax Bill Too?
The IRS has a separate failure-to-pay penalty if you don’t pay your tax bill on time. While you can get an extension to file your taxes, the IRS still requires that you pay your taxes by the April 15th due date.
The failure-to-pay penalty usually isn’t as bad as the failure-to-file penalty, so even if you can’t pay your tax bill, you can save yourself some money by making sure that you get your tax return filed.
How much will the failure-to-pay penalty cost you? One half of 1 percent (.5%) of the tax you owe for each month or partial month. Like the failure-to-file penalty, this one can also be as much as 25% of the tax you owe.
If you didn’t file or pay your taxes, the failure-to-file penalty gets reduced by the failure-to-pay penalty. This keeps the monthly penalty at no more than 5 percent of the tax you owe (unless you file more than 60 days late and the minimum penalty kicks in).
Is There a Way to Get Out of Paying the Penalties?
Maybe. But it’s not easy.
You’ll have to convince the IRS that you had reasonable cause for not filing or paying your taxes.
So What Should I Do If I Haven’t Done My Taxes Yet?
- File your tax return for 2013 to stop the clock on the failure-to-file penalty.
- Pay as much of your tax bill as you can to reduce the failure-to-pay penalty.
- Start planning now so you won’t face the same penalties again next year.