Here’s What Actually Happens When You Miss The Deadline To File Taxes
Every time we hear the words “filing taxes,” we can’t help but think of the IRS agents coming for our money as like the killer shark in “Jaws.” What? It’s true and you know it.
Messing with the IRS is never a good idea, especially when it comes to the impending deadline to file. For 2019, the deadline is Monday, April 15. Mark your calendar to submit your taxes before this date because after what we’re about to tell you, you’ll never dream of being late again.
People typically file taxes sometime between February and April, and we’re not gonna lie — the process can be complicated. Some people have to file multiple forms, and others come to realize they can’t pay their taxes in full. No matter what’s going on, you absolutely need to file before the deadline to avoid penalties.
So, what happens when you do miss the deadline?
If you’re due to receive a tax refund, nothing happens. Your only loss from filing late is that you may have to wait longer to receive your refund after you file.
If you owe money, a lot happens. You could be facing two penalties: one for filing after the due date and one for paying late.
The late-filing penalty is usually 5 percent of your unpaid taxes each month up to a maximum of 25 percent. If you file over 60 days past the due date, you’ll also pay a penalty of $210 if you owe $210 or more, or 100 percent of the unpaid tax that you owe if it’s less than $210.
The late-payment penalty is typically 0.5 percent of your unpaid taxes each month, but the longer you wait, the bigger that percentage becomes. The highest percentage you can owe if you keep your taxes unpaid is 25 percent. Yikes.
Now, if you can show reasonable cause as to why you couldn’t file or pay on time, the IRS may cut you a break and you won’t be penalized at all.
Should you file an extension?
If you already know you’re not going to file your taxes by the deadline, it’s important to know that the IRS offers extensions. All you have to do is file for it by the original tax deadline. Just file form 4868 by April 15, 2019, and you’ll receive six more months to file your taxes. Your new tax deadline will be in October. Even if you’re expecting a refund, it’s smart to file for an extension if you don’t think you’ll file on time.
Important Note: Filing for an extension does not increase the time you have to pay the taxes you owe. It just gives you more time to file your tax return. So, before the April deadline, estimate your tax bill and pay as much of it as you can to the IRS. Estimate how much you owe with a calculator, like this one on NerdWallet, and then pay as much as you can via the Direct Pay feature on the IRS website.
Now, if you miss this second October deadline, the same penalties and fees may apply. However, if you paid at least 90 percent of what you owe by the April deadline, the late-payment penalty may not apply.
Some words of wisdom to help you file with ease:
1. You should file even if you can’t pay it all upfront. You have the option to set up a payment plan with the IRS. All you need to do is communicate what’s going on. The IRS will work with you.
2. You haven’t totally ruined your life if you file late. As soon as you realize you’ve missed the deadline to file, go do it. The interest on your owed taxes isn’t terrible at first, so just don’t put it off any longer than you have.
3. Take advantage of payment options. Consult the IRS website to figure out exactly how you can pay your taxes in the quickest manner possible.
Whatever you do, aim to file your taxes on time every year. Rule of thumb? The sooner the better. Once you have all of the forms that you need to file your taxes, get to it. You’ll either feel a weight lifted off your shoulders when that tax bill is paid, or you’ll get a refund that you can stash away for your future.