April 15th. It’s one of the most important days of the year for Americans. Every year before or on April 15th, millions of Americans file their taxes, either themselves or through a third party, and await their final judgement from the Internal Revenue Service (IRS). Coincidentally, this year’s tax return deadline is actually April 18th. Regardless, millions of Americans find themselves rushing to file their taxes in order to avoid the long arm of the law sweeping in and imposing its wrath.
But, what actually happens if you forget to file your taxes or pay your owed taxes? Well, as it turns out, the long hand of the law isn’t as terrifying or cruel as you would think.
Failure-to-file
This is probably one of the easiest penalties to avoid. If you are adept at finance enough to file your own taxes, then make sure to do so before the deadline. If you are like most others, who are not as financially savvy, then make sure to hire a third party company to file your taxes for you. Regardless of the method you choose, make sure to file your taxes! The process isn’t terribly complicated, especially if somebody else files them for you. According to the IRS’ official website, if you do file late, the penalty is “normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late.” The website goes on to mention that, regardless of how long you go without filing, your penalty will never go above 25 percent of your unpaid taxes.
Failure-to-pay
This is possibly the easiest penalty to receive. Some people, after filing their taxes, forget that they must also pay back their taxes after filing—some people actually do not owe any taxes afterwards. But for those who do owe taxes, make sure to pay them. The IRS’ website states that a failure to pay taxes owed by the deadline will result in a “penalty of ½ of 1 percent of your unpaid taxes.” You’ll notice that this penalty is not as bad as the failure-to-file penalty, which is even more reason to avoid this penalty.
Other Options
There are options available to those who are having financial issues, but the IRS cannot help you unless you file. IRS.com offers a plethora of information and resources designed to assist you with filing. For example, if you can not pay back your owed taxes, the IRS has programs available that can ease the payment, even breaking it up into installments, but only if you file your taxes first. You can also timely request an extension, which the IRS typically will grant.
The IRS is not a heartless monster, but they are a well-oiled organization that will notice if you fail to file or pay your taxes. As long as you communicate any issues or obstacles with them early on, then they will more than likely be flexible and understanding.