What if I don’t file taxes by deadline? Check details about Penalties and Extension!

If you don’t file your taxes by the deadline, you may face penalties and interest charges. The deadline for submitting your 2023 tax returns is April 15, 2024. If you need more time, you can file for an extension till October 15, 2024.

What if I don’t file taxes by the deadline?

Failure to meet the tax filing deadline may result in penalties and interest fees. The deadline for submitting your 2023 tax returns is April 15, 2024. To request additional time, you can apply for an extension, extending the deadline to October 15, 2024. 

It’s important to note that while an extension grants more time to file, it does not extend the deadline for paying any outstanding taxes. If you fail to file your taxes on time and you owe money, the IRS will charge you a late filing penalty. 

The penalty is usually 5% of the unpaid taxes for each month or part of a month that your return is late, up to a maximum of 25%. If your return is more than 60 days late, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

Penalties for Late Tax Filing

Missing the tax deadline can lead to financial penalties from the IRS. Some of the specific implications are:

Failure-to-File Penalty:

  • This penalty applies if you don’t file your return by the due date, even if you don’t owe any taxes.
  • It’s a hefty 5% per month (or part of a month) of the unpaid taxes you owe.
  • The penalty is capped at a maximum of 25% of your unpaid taxes.
  • In this case, you’d be charged the maximum penalty of $2,500.
  • The penalty is based on the unpaid taxes, not your total tax liability.
  • If you already paid your estimated taxes throughout the year, you might owe less in taxes when you file your return, reducing the penalty amount.

Interest on Unpaid Taxes:

  • On top of the failure-to-file penalty, you’ll also be charged interest on any unpaid taxes.
  • This interest rate is adjusted quarterly by the IRS.
  • Interest accrues monthly from the original due date of your return until the balance is paid in full.
  • There are some exceptions to the failure-to-file penalty. For example, if you’re stationed abroad in the military or serving in a combat zone, you might qualify for an extension.

What should we do to avoid penalties?

Here are some key strategies to avoid tax filing penalties:

  • File your tax return electronically (e-filing): E-filing is not only faster and more secure, but it also reduces the risk of errors that could delay processing. 
  • Mark your calendar and set reminders: The tax filing deadline is typically April 15th of each year (subject to change). Set calendar reminders and consider using tax software that can notify you of upcoming deadlines.
  • Gather your documents early: Throughout the year, keep good records of your income, deductions, and credits. This will save you time and hassle when it’s time to file.
  • File for an extension if needed: If you can’t file your return by the deadline, you can request an extension to file electronically through the IRS website:  An extension gives you more time to file your return, but it doesn’t grant you an extension to pay any taxes you owe.
  • Pay as much as you can by the deadline: Even if you can’t afford to pay your entire tax bill by the deadline, make a payment towards what you owe. 
  • Consider an instalment agreement: If you can’t pay your tax bill in full by the deadline, you can apply for an instalment agreement with the IRS. 

How to pay the penalty for late tax filing?

Here’s what you can do to settle your tax bill and penalties online:

File your Tax Return Electronically:

  • The IRS website offers various options for e-filing your return, including using tax software or the IRS Free File service.
  • During the e-filing process, the software will calculate any penalties and interest you owe based on your tax situation.

Choose your Payment Method:

  • Once you e-file your return, you’ll have the option to select your preferred payment method for your total tax liability (including penalties and interest).
  • The IRS offers several online payment options:
    • Direct Pay: You can make a direct payment from your checking or savings account without needing to register for an online account.
    • Electronic Funds Withdrawal (EFW): This option allows you to schedule a withdrawal from your bank account to pay your taxes.

Submit your Payment:

  • Complete your selected payment method by following the on-screen prompts.
  • Once submitted, your payment will be electronically applied to your tax bill, including any penalties and interest.

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