You are worried because you haven’t filed your taxes on time. You may be wondering what will happen if you are late with your taxes. It depends on when you file your taxes after the deadline. The tedious process of filing taxes seems to bore almost everyone. Some people think that filing taxes can be a terrifying activity, involving terms like “withholdings” or “qualified dividends”. However, there are some tools you can afford that will help you to file your taxes with no headaches.
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What happens if you file your taxes late?
Imagine that the deadline is only a day away. Will you wait and see if the penalties come? You don’t need to worry, as you can extend your payment deadline by requesting an extension. You should not think that the extension will also extend your payment deadline. This is the most common mistake that people make.
You may wonder what the consequences will be if you file your federal tax return after the due date. Will the International Revenue Service (IRS), knock at your door? You will be jailed if you miss the deadline for filing your taxes. Continue reading to learn more.
There Will Be No Refund
The IRS says that late filing of tax returns is not penalized if the taxpayer is due a refund. However, you won’t get your refund until you file your taxes. It can take up to 21 days for a refund to be received. If you claim the earned income credit, it could take longer. The IRS online tracking tool allows you to check the status of your refund.
Are you owed taxes?
If you file late, it can cost more. In this case, you will have to pay the full amount before the due date or else you will be penalized and interest will accrue. Paying late is not as bad as filing late. For late filings, you will be charged 5% of your outstanding taxes per month. This is capped at 25%.
If you pay late, there is a penalty
Two penalties can be incurred if you pay and file your taxes after the due date. Late payment penalties are 0.5 per month of outstanding balance. You must notify the IRS if you are unable to pay the full amount due by the due dates or shortly after.
The good news is that the interest rate on your monthly payment will drop from 0.5% to 0.25 % if you pay by installments.
Interest Will Accumulate Rapidly
Interests will be added to your tax debt in addition to penalties. Interest rates are usually 3% above the short-term federal interest rate. The interest rates can add up quickly on penalties.
In general, it’s not a good idea to file your taxes late, but you can still do so. You may not be eligible to receive your penalty if you file late. You will have to pay up to 25% more of your tax owed for each month you don’t file. The IRS will still do all the work for you, even if your tax return is not filed. IRS receives most of your documents related to income. They know your income for the year. They also use a variety of tools to estimate the payment.
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