April is right around the corner, which means the tax filing deadline is almost here. If you owe this year, you are probably just starting to think about your options.
The Internal Revenue Service recently released some numbers about collection efforts from fiscal year 2015. The Service assessed approximately $14.5 billion in penalties for returns not filed timely. If you owe a significant tax bill and cannot immediately pay, you can avoid one penalty by filing your return before the deadline.
The dollars collected in penalties for returns not filed in a timely manner show the extent of the problem. Back taxes and problems associated with unfiled returns do not go away when ignored.
Little known facts about 2016 filing deadlines
As everyone generally knows, April 15th is tax day. But there might be some things you do not know.
If submitting your tax return old school through the mail, a return postmarked by April 18th is considered on time, according to the US postal service. Residents of Massachusetts and Maine get a little extra time due to the Patriots’ Day state holidays. The due date for these residents is Tuesday, April 19th.
For procrastinators this probably comes as good news. It won’t however affect the amount you owe.
Avoid one of two penalties
When you owe taxes and file your return late, you are assessed a failure-to-file penalty and a failure-to-pay penalty. Each penalty is different:
- The late filing penalty is 5 percent of the unpaid tax bill for each month the return in late. It caps at 25 percent of the unpaid tax bill. A minimum penalty of $135 applies when the return is more than 60 days late.
- The failure-to-pay penalty is .5 percent of the tax bill due. It can add up to as much as 25 percent of the unpaid balance similar to the late filing penalty.
On a $10,000 tax bill these penalties can add up quickly. Avoid the late filing penalty by filing prior to the April deadline or taking a few minutes to complete Form 4868.
If you have several years of unfiled returns, seek the help of a tax attorney to find out your options.