Missed the Tax Deadline and Owe Money? Why You Should Get Moving ASAP
- There's no penalty for being late with a tax return when you're due a refund.
- If you owe the IRS money, the penalty for filing a return late can be pretty extreme.
When you have a tax liability on your hands, being late with your return could have consequences.
There are different reasons why people file their taxes late. For some, it boils down to a last-minute emergency getting in the way. For others, it could be a matter of missing paperwork, such as a 1099 form from your bank or brokerage account that never got generated.
If you didn't file your 2021 tax return by April 18, then it means you've officially missed the deadline. And if you're owed a tax refund, that's honestly not such a big deal.
Granted, the longer it takes you to get your taxes done, the more you'll hold that refund up. But from an IRS standpoint, there's no penalty for being late with a tax return when you're waiting to collect cash.
On the other hand, if you have reason to believe you owe the IRS money from 2021, it pays to file your tax return as soon as you can (and, if possible, pay your tax bill). The longer you wait, the more of a costly penalty you might rack up.
You don't want to be late if you owe the IRS money
The IRS doesn't like the idea of taxpayers sitting on funds they owe. And so it imposes penalties for being late with a tax bill.
If you owe the IRS money from 2021 and don't pay your bill in time, you'll be charged a penalty equal to 0.50% of your tax bill for each month or partial month it's late, up to a total of 25%. But the penalty for being late with a tax return in that scenario is much harsher.
When you owe money and don't submit your return by the filing deadline, you face a penalty equal to 5% of your unpaid tax bill per month or partial month that return is late, up to 25%. This means if you owe the IRS $2,000, being only a few days late with your return could result in a $100 penalty. Ouch. As such, if you've already missed the tax-filing deadline, your best bet is to submit your return as quickly as possible to minimize the extent to which you rack up penalties.
Avoid being late in the future
Some people submit late tax returns accidentally -- they forget about the deadline or just run into a time crunch. In the future, if you think you'll be late with a tax return, make every effort to at least request a tax extension by that year's filing deadline.
A tax extension will give you six extra months to get your taxes in without facing a penalty for being late with your filing. Now it won't give you more time to pay your actual tax bill, so the 0.50% penalty mentioned above still applies if you're late with that payment. But at least that way, you can avoid the more expensive late-filing penalty.
What’s more, if this isn't the first time you've missed the tax-filing deadline, make sure to give yourself extra time to do your taxes in the future. That way, you can potentially avoid a repeat scenario -- and a world of stress.
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