April 18 is Tax Day i.e. the deadline to file your taxes. So, what if you know you won’t file in time?
First: Apply for an extension. You can do it online for free.
Now, if the government owes you money, typically because your employer withheld more than necessary, you have three years to file before the IRS will keep the money they owe you. File as soon as you can anyways because there’s no reason to leave that money with the IRS.
If you owe the government taxes, pay attention because the fines and fees come fast.
The extension you applied for can give you an extra six months to file, however, you still need to estimate and pay what you think you owe for the year by the April deadline. If you don’t pay by April 18, 2017, you will be charged a fee equal to 5 percent of the tax you owe per month it was left unpaid, up to 25 percent. The IRS sends reminders during this period and if you ignore them, they may file on your behalf without all the deductions you’re entitled to. You’ll also be charged interest: 3 percent plus the federal short-term rate, compounded each day.
TurboTax gives the following example:
Example: Let’s say you didn’t file your return or an extension by April 18, 2017, and you still owe the IRS an additional $1,000.
Best-case scenario: You file your return on April 29 (2 weeks late) and submit your payment for $1,000. You would likely owe an additional $50 for the late-filing penalty ($1,000 x .05 = $50).
If you hit two months overdue, you’ll pay a minimum of $135 in penalty fees or the balance of the tax you owe. The combination of not-filing and not-paying is really what gets you. TurboTax advises that if you can file – even if you can’t pay immediately – you’ll be in better shape because the late-filing penalty can be 10 times higher than the late-payment penalty.
It’s also worth adding that if you never pay – i.e. commit a federal crime – then at some point the IRS is going to come find you in person. At that point, you may go to jail. Which is to say, if you think you’re going to miss the April 18 deadline, file an extension right away.
