5 Things to Consider About Filing Taxes Late

Estimated reading time: 2 minutes, 27 seconds

Retirement accounts and taxes go hand in hand. In fact, taxes are a huge reason why someone chooses a specific account (i.e. Traditional or Roth), and reducing one’s tax burden at retirement is a leading focus among IRA holders.

Unfortunately, there are times when a taxpayer simply cannot pay his or her taxes on time. If you owe taxes and missed the federal tax return deadline this year, you will likely owe interest and penalties to the IRS when you pay.

Even if you miss the tax deadline, you should file your return and pay the tax as soon as possible to keep interest and penalties to a minimum.

Tax Day may have come and gone, and if you are due a refund, there’s no penalty for filing late (as long as you file within 3 years of the deadline or extended deadline). But if you owe federal taxes, there likely will be. Here are five things to consider about filing taxes late:

  1. A penalty for late filing. Filing more than 60 days after the due date (or extended due date) garners a minimum penalty of $205. If you owe less than $205, then the penalty is 100 percent of the unpaid tax. And the penalty could be as much as 5 percent of your unpaid taxes each month (up to 25 percent).
  1. A penalty for late payment, which is usually 0.5 percent of your unpaid taxes each month. This, too, maxes out at 25 percent. However, if you requested an extension and paid at least 90 percent of taxes owed, you may not incur this penalty. You will have to pay the remaining balance by the extended due date, though, and will owe interest on any taxes paid after the original due date (Tax Day).
  1. You could be penalized twice, with interest accruing on top of the penalties. The maximum amount charged for the combined penalties is 5 percent per month.
  1. Did You Miss the Tax Deadline?File even if you can’t pay to keep your interest and penalties as low as possible. The IRS recommends you pay as much as you can up front and perhaps pay the remainder with a debit or credit card or loan. Those options might be less expensive than some of the resulting penalties, and the sooner you pay the less you will owe.
  1. Multiple payment options are available. These include debit/credit card payments and IRS Direct Pay (which enables you to pay directly from a checking or savings account), among others. You may also be eligible to set up an Online Payment Agreement with the IRS (additional fees may apply).

For more on this topic, visit Tax Topic 653 and Publication 594. These go into more detail on bills, penalties and interest charges and the overall IRS collection process. It’s also important you know your fundamental rights as a taxpayer. Knowing your options is key to reducing or maybe even eliminating any amount owed to the IRS due to late filing or payment.

This site uses cookies to learn how to communicate better with our website visitors and share the most relevant information. By continuing to browse the site, you are agreeing to the use of our cookies. Privacy Policy
You are currently allowing us to set cookies. Privacy Policy