The annual deadline for most people to file their federal income tax return and pay any taxes they owe from the previous year is April 15th. If that date falls on a weekend or holiday, then taxes are due the following business day. Here are eight facts about what happens if you pay or file taxes late.
1. If you are owed a refund, there is no penalty for filing late. The IRS will simply hold on to your money until you do submit your return. The thing is, you must file your taxes within three years of the original deadline to claim your refund or you will lose your right to it.
2. If you owe taxes and do not file your return by the deadline, you will be hit with a late filing penalty. Currently, you will be charged 5% of the taxes you owe for each month you fail to file past tax day. The maximum fee is 25% of the taxes you owe.
3. If you have not filed within 60 days of the tax deadline, you will owe a fee of either $205 or 100% of your unpaid taxes, whichever is less.
4. On the other hand, if you file your return but you don’t pay your tax bill by the deadline, you will owe a late payment penalty. The current penalty is equal to 0.5% of the taxes you owe for each month you fail to pay your taxes past tax day. The maximum fee is 25% of the taxes you owe.
5. If you don’t file a return or pay your bill, you aren’t penalized twice. Instead, the 0.5% late payment fee will be waived.
6. If you requested an extension, you will not be charged a penalty as long as you file by the due date in October and pay your tax bill by the April deadline.
7. You will start accumulating interest on your unpaid taxes one day after your bill was due. This interest will compound daily until the bill is paid in full. The current interest rate is 5% but is subject to change.
8. You may qualify for a First Time Penalty Abatement if you meet the following requirements:
- You were not required to file a return before or you did not receive a penalty for the previous 3 years.
- You filed any required returns or filed an extension for all previous years.
- You paid or set up a payment plan for any tax due. You must be current on your payment plan if you have one.