Although it might be hard to believe, the consequences of missing the April income tax filing deadline can be even more frustrating than completing the return in the first place.
You can get an automatic six-month extension of the time to file just by asking, but if you owe taxes, you have to send in the estimated amount by the original filing deadline – for 2017, that’s Tuesday, April 18 – or you can expect to be hit with penalties. Here are some tips on how to minimize the impact on your wallet.
Late-filing and late-payment penalties
Once the IRS receives your late return, it will calculate your failure-to-file penalty. This penalty applies only if you still owe money. It usually amounts to 5% of your unpaid tax for every month your return was overdue, with a maximum penalty of 25%. You’ll have to pay a second fine if your return is more than 60 days late, which will be either $205 or 100 percent of the tax owed, whichever is smaller. The penalty may be waived if you provide a reasonable explanation for filing late, according to the IRS.
If you don’t pay everything you owe on time, you’ll also face a somewhat less harsh late-payment penalty, usually 0.5% of the unpaid tax per month. But this can be waived for up to six months if you paid at least 90% of what you owed by April 18 and get an extension.
Since the late-filing penalty is typically the steeper of the two, try to file your return as soon as possible while paying as much as you can, even if that amount doesn’t cover your entire tax bill. Adjust your budget accordingly to ensure that you can pay the remaining balance as rapidly as possible.
What if I’m owed a refund?
Here’s some good news: If Uncle Sam owes you a refund and you missed the filing deadline, you have up to three years to claim that money. After those three years are up, your refund will be handed over to the U.S. Treasury.
Receiving a refund means you overpaid on taxes throughout the year and essentially gave the government an interest-free loan. Not filing your return by the deadline just prolongs the time it takes to receive your refund, and the government gets to continue to use your money interest-free.
Don’t miss out on credits and deductions
It can be easy to overlook tax credits and deductions as you race to submit a return. These breaks can reduce your tax liability or increase your refund by hundreds or thousands of dollars and therefore shouldn’t be ignored. Even if you file late, you can still claim these benefits, so don’t miss out.
Getting an extension next time
To avoid penalties for missing the April 18 deadline, apply for an automatic extension as soon as you think you may need one by completing Form 4868, which you can do by phone, online or through the mail. This will give you an additional six months to complete your tax return without getting penalized. You can ask for more time at any point after Jan. 1 up to the filing deadline, but not afterward. So don’t delay if you need an extension.
The bottom line
Although failing to file your taxes on time isn’t a tragedy, it can end up costing you quite a bit if you don’t make amends quickly. Fork over whatever amount you can as soon after as possible to avoid racking up additional fees and interest. And don’t forget to take potentially helpful tax credits and deductions, even if you’re late getting to the table.
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