Tax season is swiftly approaching, and if you are not yet quite ready to file on time, this article about late tax filing can be a sure shot saving grace. If you think you can’t gather all the necessary documents needed by April 17, 2018, no need to get too anxious. Yes, you will be facing some fees for filing late, but the earlier you file, the less it will be. Below are some of the important things you need to know about late tax filing!
Late Tax Filing: Key Pointers to Take Note Of
1. File for an Extension
The first and the best thing you can do if you think you’ll miss the tax deadline is to file an extension. All you have to do is fill out the IRS Form 4868. This entitles taxpayers, who can submit it by the deadline, a six-month extension for filing a return. For the 2017 tax year, the extended tax deadline will be on October 15, 2018. Unless you are living out of the country, this is the only extension IRS can grant you.
2. File Even If You Can’t Pay
If you file on time and pay as much as you can, the penalties and interest will be at a minimum. Paying by credit or debit card or getting a loan if you’re not able to pay in full can be a lot more affordable than having a debt with the IRS. Paying your bill the soonest will definitely lessen what you’ll owe the IRS.
3. Penalty for Late Tax Filing
There are two penalties that may apply: One for filing late and the other one is for late payment. These fees and penalties can surely add up fast. The penalties for late tax filing is far worse than paying late. Filing your tax return longer than 60 days after the due date will result in a 5% penalty of the unpaid balance every month up to a maximum of 25%.
4. Penalty for Paying Late
Penalties for late payment will apply if you’re not able to pay the taxes you owe by April 17, 2018. Extra charges will be implemented whether you filed for an extension or not. The penalty for late payment is 0.5% of your unpaid taxes every month up to a maximum of 25%. An interest will also be applied from the regular filing due date until the full balance is paid. As of now, the interest rate set by the IRS is 4.18%, but it is still subject to change.
5. You Still Have to Pay Your Balance on Time
Filing for an extension will not buy you more time to pay your unpaid balance. Even if you file for an extension, you are still expected to pay your total tax liabilities by the deadline which is on April 17, 2018. Moreover, it is crucial to make your estimated tax as accurate as possible.
6. Payment Options
There are several payment options the IRS can provide for us. You can pay using savings or checking account for free, or you can pay by credit or debit card. If you can’t pay the full amount on time, you can apply for an online payment agreement and meet your tax debts in monthly instalments. Also, you can request to temporarily delay the collection process until your financial status improves.
7. Ask for Help
It can be a pretty stressful experience if you’re in a position where you think you can’t meet the filing deadline. If you are having trouble with your financial situation, it is better to consult or hire a tax expert to assist you with your problem.
Want more info about late tax filing? Watch this video from Hector Garcia CPA and find out the penalties for late filing and late payment!
Filing for an extension is not that difficult as there are millions of Americans who file for tax extension every year. Nonetheless, it is beneficial to have a clear understanding of how tax extensions work as well as the interest and penalties that come with late tax filing. Now, you know the steps to take if you think you’ll miss the deadline.
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