Interest When You File Tax Return Late
Here are the interest rates for the years 2013, 2014, 2015, 2016 and 2017. The tax filing deadlines are based on the due date of the return, not the date you actually mail it in.
Interest on the amount you owe increases with the length of time it takes you to pay:
If your taxes are paid in full by the deadline (April 18, 2014, for the 2013 tax year), no interest is applied.
If your taxes are not paid in full by the deadline, interest is charged from the April deadline until the balance is paid.
And here are the percentages that are applied to the amount owed:
2013 and 2014 (April 18, 2014, for the 2013 tax year): 3 percent
2015 and 2016 (April 19 for the 2015 tax year; April 18, 2016, for the 2016 tax year): 5 percent
2017 (April 18, 2017, for the 2017 tax year): 3 percent
Compounded daily, these percentages mean that anyone who owes back taxes has to pay interest on how much they owe as well as interest on the interest. It can add up very quickly, especially if the tax owed is large.
Penalties When You Don’t File Tax Return
It’s up to the IRS to determine if you must submit a tax return and what penalties you may face if you don’t file.
It’s up to you to accurately report your income and claim all of the tax deductions and credits for which you qualify. And if you have income or deductions and credits that are just a little bit different than what you originally reported, you might not end up owe any additional tax, but you may have to pay back tax you previously overpaid.
If you don’t file your tax return when you’re required to, you may face a penalty. If you got behind on your taxes this year, it’s important to file as soon as you can. In fact, the IRS typically allows taxpayers who failed to file their tax returns on time to do so without the fear of penalties or interest.
Some taxpayers may be able to get a penalty waiver from the IRS if they qualify under one of the following categories:
If you have a good reason why you didn’t meet the filing deadline. For example, you got divorced and moved three states away or you just found out you’re having a baby.
You were a victim of fire, theft, or natural disaster.
Filing Tax Return Late Example
The basic filing requirements for Federal Income Tax are any one of the following:
- An electronic filing of your income Tax return;
- Mailing your income tax return on time or requesting an extension;
Electronic Payments through your tax payment account.
Now, if you fail to participate in any of the above submission requirements, you may end up receiving late filing penalty fee from IRS.
The late filing penalty from IRS is calculated in three tiers:
Tier I is 3% per month starting from the due date of the return and it is charged if you file your return 3 months after the due date.
Tier II is 5% per month starting from the due date of the return. This is charged if you file your return 6 months after the due date.
Tier III is 10% per month starting from the due date of the return and it is charged if you file your return 12 months after the due date.
Note: There is no fix late filing penalty percentage and the percentage changes depending on whether you apply for an extension or not. The above mentioned rates are IRS’s base penalty percentages. For tax professionals and lawyers, the penalties may be more significant. For example, the late filing penalty contains the following categories
Don’t Forget The Tax Extension
WASHINGTON – The Internal Revenue Service today announced that the 2015 filing season begins Jan. 19 and reminds taxpayers who have not done so that they should request an extension of time to file their income tax return by the April 15 deadline.
This is the second consecutive year that the IRS begins processing tax returns on that date.
The announcement means taxpayers can count on the full suite of IRS services and tools for the 2015 filing season, including the Where’s My Refund? tool, the online version of the popular tool that provides individual taxpayers and their tax preparers with a status of the taxpayer’s refund, which is available in mid-February.
“Extensions are free and simple to get,” IRS Commissioner John Koskinen said.
“We encourage anyone who can’t meet the April 15 deadline to use IRS Free File, e-file their return or use tax software, and take advantage of an automatic six-month extension to file.”
Last year, 130 million taxpayers used IRS Free File or Free File Fillable Forms, the electronic versions of IRS paper forms that some taxpayers can complete themselves and file with the IRS. The deadline to use both services was Jan. 31.
How Do You File Taxes After It’s Too Late?
The deadline for filing your taxes is April 15th, unless you have requested an extension. You can make this request by the original April 15th deadline. After that, there is a late filing penalty which is 5% per month and maximum of 25% of the tax amount due.
So what should you do if you haven’t filed your taxes on time? File them as soon as possible, of course. If you’ve been procrastinating filing your taxes because you’re doing it yourself or you’re using a tax preparer, whether for the first time or not, you can take it from me that the longer it takes you to file, the harder it will be to finish.
If you have received a letter from the IRS, don’t ignore it. However, they won’t call you and they definitely will not call you up to give you time to finish your taxes. Even if you don’t have a letter from the IRS, you can still file your taxes on time. So don’t assume that they are late until you know for sure.
File Your Tax Return and Avoid the Headache
A common myth about tax time is that the IRS will simply let you slide for not filing your return and paying your taxes. Since over 30 percent of all taxpayers owe money to the IRS to start with, it’s easy to see how this belief became popular. You might think, “If I haven’t filed yet, what’s the worst that could happen?”
The short answer here is that if you owe taxes, you could incur penalties and even even criminal charges as a result of neglecting to timely file and pay your taxes. The consequences are generally easier to handle if you have neglected to file your tax return in the past, but are much heavier if you fail to file and pay your taxes when you know you have a tax debt. So, we recommend that you at least have a basic understanding of the penalties that you could face if you slack on your taxes without filing.
In the following sections, we’ll walk you through scenarios stating the differences between the two groups.
How to File Taxes on Time
Have you ever encountered a situation where you did not get the chance to file your tax return on time, so you ask yourself, what happens if you don’t file your tax return? Well, if you’re not in a rush to file your tax return, there’s no reason to worry. The deadline to file is April 15th, but you definitely have more time. The deadline is just an estimation of when you will get a letter in the mail that reminds you to file.
According to the IRS, you have to file your personal and business taxes by April 15th (and pay the taxes by April 17th) if you qualify for any of these:
- Have an employer
- Have income (any kind)
- Have money withheld
- Have a tax liability
If you do not have any of these requirements, you have no need to worry about filing by April 15th. You can take your time to file your taxes. The IRS will contact you closer to the deadline …which is October 15th.
If you don’t file your tax return on time, you’re going to have a hard time accessing tax refunds and credits you’re entitled to, and you may even be penalized by the IRS for not filing on time.
According to the Internal Revenue Service (IRS), if you’re due a refund, you could be held responsible for any penalties applied to the refund and any interest accrued. The IRS will send you a letter at the mailing address you have on file, generally 60 days before the applicable deadline. If you don’t respond to the letter, the IRS will mail you another letter, generally 30 days before the deadline to remind you that you need to send them a valid tax return. But if you ignore this reminder, you may be responsible for any applicable penalties and interest without a valid tax return.
Both voluntary and required tax returns must be sent by the due date. IRS recommends filing electronic tax returns by the due date, through their e-File system. This is because their electronic filing system will give you a faster refund and help prevent penalties. Regular paper returns made before the due date can still be processed after the deadline.
The FTC estimates that 80% of small businesses do not file returns or pay quarterly tax deposits. The FTC conviction rate for not filing a return is about 90%.
Every year, the IRS and state tax departments miss collecting billions of dollars because businesses and individuals don’t file a tax return.
File your return on time, pay what you owe, and report all income to your state and federal governments, even if you filed last year. If you messed up, the IRS will catch you eventually. Don’t compound the error by not filing an amended tax return.
Taxpayers are held responsible for their actions, and for good reason: Taxpayers who do not file a return and keep up with their filing are letting the government know that they don’t care about their responsibilities. The IRS doesn’t care that you’re busy. The IRS will get you with audits and penalties.
If you get behind, begin a filing system that’s sustainable. Start by paying your estimated taxes if you have an offshore account. Counselors at H&R Block can help you establish a filing system to make filing easier year after year.