Having to file a tax return late is always a tough situation. The extra fees can be steep and the longer you wait the more in danger you are of being subject to the failure-to-pay penalty. However, if you find yourself in this position it’s important to know what the penalties are so you plan for them in advance.
The Failure-to-File Penalty
The failure-to-file penalty applies to you if you did not file your tax return by the filing deadline. This penalty is typically more than the penalty which follows from failing to pay your taxes, and for this reason it can turn into an extremely troublesome experience.
Size of the Penalty
Filing your taxes late normally subjects you to a fee of 5 percent of any money owed for each month that you did not file. It begins to accrue in value on the first day that you missed the filing date. The penalty can reach up to a maximum of 25% of the taxes you owe in failing to file.
Late Payment Penalty
This penalty only applies if you failed to pay any taxes owed by the tax deadline, regardless of whether or not you filed on time. This payment penalty is worth 0.5% of any taxes owed for every month that you do not pay. While it’s not as steep as the failure-to-file penalty, and is often waived if both penalties apply for each month you owe, it is still an important thing to be aware of.
To avoid these penalties, you should always file and pay your taxes on time. Don’t wait!
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