Taxes » Time's Up! It's Tax Deadline Day
You've put off filing for three and a half months, but any more procrastination could cost you. So don't just sit there.
Actually, do sit there just a bit longer. Stick with Bankrate.com, and we'll walk you through what you have to do today to get the Internal Revenue Service what it wants.
Don't ignore the IRS
The key to surviving last-minute tax filing is realizing that the IRS will not be ignored.
These guys aren't kidding around when they set deadlines. The IRS wants your paperwork, and it wants it now. If you don't file your return today and you owe taxes, you may owe an additional penalty for failure to file unless you can show reasonable cause. The assessment is 5 percent per month (or any part of a month, even just a day) of your balance due.
Even if you file on time but don't pay what you owe, the IRS can charge you. This nonpayment penalty is 0.5 of 1 percent of the tax due each month, or any part of a month, that isn't paid. The fine continues until it reaches 25 percent of your late payment.
If both penalties apply in any month, you get a small break on the failure-to-file penalty. The IRS will reduce it by what it's charging you for not paying, making your potential maximum nonfiling penalty "only" 22.5 percent.
Tax penalties
- Not filing your return will cost you an additional 5 percent each month of any due tax.
- Not paying what you owe will add an extra charge of 0.5 percent each month of your due tax amount to your overall IRS debt.
- If you don't file or pay for five months, the 0.5 percent failure-to-pay penalty will accrue, up to 25 percent of what you owe, until the tax is paid.
- In that case, the total penalty for failure to file and pay could amount to 47.5 percent of your tax bill.
- If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
- Interest also is charged on the overdue amount.
But when you combine the late-filing and nonpayment penalties, even with the IRS "discount" on the late-filing charge, your total tax penalties could be substantial if you continue to ignore your tax responsibilities. Put off filing and paying for five months, and the 0.5 percent failure-to-pay penalty continues to run, up to 25 percent, until the tax is paid. This means your total penalty for failure to file and pay could amount to a whopping 47.5 percent (22.5 percent for late filing, 25 percent for late payment) of the tax owed.
The IRS also charges interest on the amount of tax due. The rate is the federal short-term rate plus 3 percentage points, and it is adjusted quarterly.
And if your return is more than 60 days late, the minimum failure-to-file penalty is the smaller of $135 or 100 percent of the tax required to be shown on the return.
Interest charges also will continue to add up -- on the penalties, too. So let's get started and get your taxes done!
Hardship relief
The IRS is not completely heartless. Through its Fresh Start program, the IRS is offering some penalty relief to taxpayers who are out of work or self-employed taxpayers whose income has dropped substantially.
Qualifying taxpayers are those who were out of work for any 30-day period between Jan. 1, 2011, and April 17, 2012. Self-employed people qualify if their business income declined by 25 percent or more in 2011 as compared to 2010 earnings. In these cases, the IRS will waive the late-payment penalty if the eligible taxpayers pay any tax, penalty and interest due by October 15.
To receive this penalty abatement, file Form 1127-A, Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship.