The deadline for filing your taxes is fast approaching — this year, thanks to a weekend and a holiday, the deadline is April 18, 2017.
But, life can be busy! Maybe your taxes are particularly complicated this year, or maybe you just don’t have the time to sit down and sift through the paperwork.
So, what happens if you don’t file your tax return on time?
If you’re getting a refund on your taxes this year, you don’t need to panic — you have until April 18, 2020 to claim your refund (or until October 16, 2020 if you filed an extension by the April 18 deadline). It’s best to file as soon as possible, however, because if you don’t file within that 3-year period, you’ll lose the refund.
If you owe taxes, things get complicated.
First, you’ll be charged a failure-to-file penalty. That penalty is 5 percent of your unpaid tax bill for every month after the April deadline that you fail to pay. The amount can grow to a maximum of 25 percent of your total unpaid bill.
In addition, you will be charged interest on whatever amount you did not pay. The interest rate is the federal short-term rate plus 3 percent with interest compounded daily. That can add up very quickly.
How to File for an Extension on your Taxes
If you think you might be unable to file your tax return by the April 18 deadline, the best way to avoid fees and penalties is to file for an automatic six-month extension with the IRS using Form 4868. It’s free and pretty easy.
But if you owe taxes, you’ll still need to pay them by the April 18 deadline or penalties, fees and interest will start to accrue.
Form 4868 does not grant the taxpayer an extension of time to pay their tax.
If you owe the IRS money and are having trouble coming up with the money, you have a few options. You can file for an extension of time to pay your tax bill using Form 1127: Application for Extension of Time for Payment of Tax Due to Undue Hardship, but be aware that the laws are very strict about granting such extensions.
When granted, these extensions usually last 6 months. For more information about extensions to pay tax, visit the IRS website at www.irs.gov.
Ultimately, it is the best and safest idea to file your return by the April 18 deadline or file for an extension. That may be a hassle now, but it could save you a significant amount of financial harm in the future. If you need assistance, please call us as soon as possible.