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Tax Day in the United States has been April 15th since 1955, but did you know that in the past 67 years this tax filing deadline has been shifted to a different date 26 times? Weekends and local holidays can push tax day back a few days, giving taxpayers extra time to do their paperwork. So what happens if you’re still late in your tax filing?
If you delay doing the painful paperwork, you might incur a late taxes penalty for late filing of taxes and late payments. Keep reading this handy breakdown of the penalty system the IRS uses for federal tax and tax returns.
The IRS Late Taxes Penalty System
Filing taxes means submitting tax paperwork to the tax authority and paying taxes refers to the actual transfer of money to that authority’s account. Tax paperwork is always due by the set tax day or by the due date received by means of an extension.
If you file after your due date, you’ll incur a failure to file penalty and you also pay a penalty for unpaid tax. Both of these are calculated based on the amount still owed to the IRS at the time. This means if you overpaid during the year then you can’t be penalized.
Penalty Amount Calculation
Filing late has a penalty of 4.5% of outstanding taxes and paying late carries a penalty of 0.5% of outstanding taxes due, for a grand total of 5% per month. The IRS will charge an additional 4.5% on the first day of every new month your filing is overdue, up to five months. So if you didn’t file on April 15th, and it’s September 16th, your failure to file penalty will be 22.5% of the outstanding amount of your tax.
Late payment penalties, on the other hand, continue to roll on every month until they’ve cumulatively reached 25%. This means the maximum penalty you could possibly pay would be 47.5% on all outstanding taxes. However, if your filing and payment are more than 60 days late, then you have to pay the smaller of $435 or 100% of the outstanding tax and a smaller amount than one of those two will not be accepted.
How to Deal With Late Taxes
The worst thing about late taxes is that the IRS charges interest on them. If you’re consistently late and continue to miss payments you could end up in serious debt.
Individuals in these situations should consult a professional tax or debt consolidation service as soon as they can. Businesses and corporations have a wider array of solutions that could suit them because of their respective sizes and interests. A back payroll tax resolution service is a great place to turn if you as an employer or owner find yourself owing the IRS money.
Deal With Delinquent Taxes Today
Einstein once said the eighth wonder of the universe is compound interest, but it’s not so wonderful when the IRS makes your outstanding taxes grow each month by charging you interest. In the financial world, tenths of percentage points are important, so if your taxes are still overdue then the 25% you could owe the IRS would be a heavy burden. Contact tax or debt consolidation today to see what steps you could take to fix the problem.
The best advice we can give to avoid a late taxes penalty is to file and pay taxes upfront. If you found this useful, check out our blog for more useful advice and tips.