April 15 (or 17th this year) sneaks up on us ever year, leaving many to rush to the local tax accountant for help with their filing. If you somehow let the time for taxes slip by without acting, do not worry. If you’re unable to complete your returns by that deadline, you can file Form 4868, an application for automatic extension, with the Internal Revenue Service (IRS).
While the request for an extension is easy enough, it still may cost you. Even though you are given extra time to fill out those forms, the amount you owed (if you owe any money) becomes past due once the tax day has come and gone. Expect to pay interest on any money owed.
There are some consequences for forgetting you taxes and failing to file this extension.
The amount of money you owe the government will control the amount of penalty you will receive. The breakdown of what you will be looking at is:
- Failure to File Penalty: If you don’f file by Tuesday, April 17, 2012, the “failure to file” penalty clock starts ticking and adding up at a rate of 5% of the balance due per month. The government doesn’t leave you completely out to dry, capping this penalty at an amount equal to 25% of you taxes owed.
- Failure to Pay Penalty: Once you file your taxes, you are not out of the woods yet. You have to pay what you we by the deadline as well. Otherwise, you get hit with a “failure to pay” penalty that runs at 0.5% per month with a maximum of 25% of your unpaid tax. This does not include the interest that will add up on the amount you owe.
- Interest: Expect to be charged interest for any balance you have due to the IRS. You’ll be looking at a rate around 8%, which is a lot less than the rate charged by most credit card companies.
Good Rule of Thumb
In the end, our advice to anyone is simple. If at all possible, try to file and pay your taxes on time. If you will already have trouble paying off what you owe, putting off paying the IRS will only cause the amount to grow pretty quickly with the fines for both not filing and not paying. If you can’t pay, you might as well file either way or at least file that extension. Because the ‘failure to pay’ penalty is so much smaller than the ‘failure to file’ penalty, you’ll save yourself a good amount of money. Simply filing on time will save you a lot of money and frustration, so hurry up and file something now, whether it be your taxes or extension. Tomorrow (April 17) is you last day.
Figuring out your financial situation can help prepare for those taxes you may owe every year. Our Estate Planning attorney can help you get your estate and finances in order so that you can rest easy every year knowing that you have everything in order. CONTACT our Maryland Attorney for your FREE consultation at 410-730-4404.