Three really bad things can happen to you when you file your tax return late. Before you jump up and down, please remember that if you file before the expiration of any extension you requested, you aren’t filing late. (But, you also need to know that filing an extension does not mean you have an extension to pay your taxes- they are still due on the original filing date for taxes; the 15th of March (business) or 15 April (individuals.) I am really discussing the situations when you elect to file your taxes a year late, a few year’s late….
Problem 1: If the IRS catches you before you finally get around to filing your return, you can bet on two things. The IRS will compute your taxes due- and the amounts due will be humongous (and probably not correct). The second thing- you are primed for an audit situation.
Problem 2: If you owe ANY taxes, then you now owe a lot more- because there is a 5% a month penalty, up to 25% of the taxes due. (This is a penalty, folks- it’s not deductible.) But, that’s just the failure to file penalty. Now, let’s discuss the failure to pay penalty- that one is 0.5% a month up to 25% of the tax due.
Problem 3: Now, comes the interest on the amount you have owed- and on the penalties. These accrue from the original due date of the return- not the day you filed. (Remember, there are NO extensions for the taxes due- ever.)
Oh- and these are for individual taxes. If this was a business entity that was required to submit a K-1 to anyone- well that penalty is $ 150 per month PER K-1 to be provided. So, a five-month late tax return with 1 stockholder means you owe $ 750 in penalties; if you have 10 stockholders, you now owe $ 7500. You can do the math for the other situations.
Another thing- corporate taxes were due 15 March- which means IF you filed for an extension, you have about 3 more days left to get them in. And, that assumes you owe no money- because if you do, you can be assures you will now owe more. Individual taxes were due 15 April- which means IF you filed for an extension, it better be in the next 30 days…
Tick-Tock!
So glad we are on time with our taxes. I wasn’t aware of all the penalties involved, but I have always known that I don’t ever want to be late!
I have clients who think that their deadlines are 15 October- and then, still, fail to provide the information to get them done on time. And, then, wonder why the IRS is always picking on them, Suerae!
Thank you. I always drag my feet at tax time.
Carol Tomany recently posted..Foodie Doo Two
Well, they may have more “cavalier” enforcement attitudes in Canada… But, in the states, they have finally decided to employ multiple year audits for those that are routinely late or routinely “miss” revenue…
Good reminder. I have never filed late but the last 5 or so years I have filed extensions. Each year my goal is to not do that. Each year I don’t make my goal…. ah well…
I just get nervous when an S or LLC does- because the fine is pretty steep- and the leniency for failure to file is also pretty non-existent.
The IRS wiped out one neighborhood stock coop with their late filing one year- 150 members and 10 months… Oops there went another 25K in penalties…
And yet no extra deductions for being early.
The early birds are typically those who get refunds, Marie…
But, no, there is no reason to file early- just on time.
This can get taxing very fast. I hate taxes. If ever I cannot pay, which will happen, I am going to have to leave the country or die (the other inevitability.
Ann Mullen recently posted..Senior Care Grief Session Every Fourth Thursday
Or, employ a very reputable tax consultant who will insure you pay the lowest amount of taxes required by law, Annie…
I know someone like that 🙂
Well, as my grandmother used to say, the taxman is always right. It is true in any country, right?
MuMuGB recently posted..Over Sensitive
I have generally found that NOT to be be true, Muriel. I guess that’s why folks hire us!