Tax filing procrastination can have serious consequences. It's estimated that more than a third of all Americans wait until the last minute to file their taxes. But if you're someone who waits too long and misses the deadline for filing your taxes, there are several things you should know about what happens when you are late on taxes.
Deadlines to Know
According to IRS, the tax submission system will be officially open on January 23, 2023. The deadline for individuals to file taxes is April 18. Businesses will also have to file their taxes by April 18.
For state corporations and partnerships, the deadline is March 15. However, if taxpayers need an extension to file their taxes, they can request an additional 6 months of filing time, after which they will need to pay interest and potential penalties for late filing.
The due date is April 18 instead of April 15 because the usual deadline falls on a Saturday. Besides that, Monday, April 17, is Emancipation Day, a legal holiday in the District of Columbia.
Options Available to You When Late
Several options are available if you have missed the filing deadline. Firstly, you should file your taxes as soon as possible to avoid penalties and interest accruals.
If you have a pending refund, there are no penalties, but you can't claim your refund until you file your taxes. You should also note that the IRS limits the period they can hold onto it.
Another option is to request an extension from the IRS to have more time to submit your tax return. By filing for an extension, you will avoid penalties associated with late filing and paying taxes. However, it is essential to note that this only gives you additional time to file, not to pay. You will still need to make payments by the original deadline to avoid interest and penalties.
Penalties When Late on Your Taxes
What happens when you are late on your taxes? If you miss the filing deadline and don't request an extension, the IRS will charge a penalty of 5% of the unpaid monthly tax amount up to a maximum of 25%. Moreover, interest (at the rate of the federal short-term rate plus 3%) will be charged for every month or part of a month that the tax is unpaid.
The IRS may waive penalties if you give a reasonable cause for not filing and paying taxes on time. However, this does not apply to interest.
Different Ways/Types to Pay
If you owe back taxes, the IRS provides several payment options. You can make payments through direct debit or by sending in a check or money order. The IRS also offers an online payment plan program that allows taxpayers to pay their taxes over time. Additionally, you may qualify for estimated tax payments throughout the year if you're a business owner.
For property taxes, many states allow homeowners to pay in installments or divide their payments over several months. You should reach out to your local government office to see your available options and which penalties will apply to late payments.
It's important to meet the deadline for filing and paying taxes. Failing to do so can lead to hefty penalties, interest charges, and a potential IRS audit. To avoid these problems, file your taxes on time or request an extension if needed.
As always, consult with a professional tax advisor if you have any questions or need assistance.