Here’s a strange-but-true story for ya: Al Capone was one of the most notorious American mobsters of the 20th century, but the FBI struggled to pin any actual crimes on him. In fact, it wasn’t until the IRS got involved that he was finally sent to prison – for some truly serious tax evasion.
Obviously, that is extreme. For the average American taxpayer, a failure to file or pay taxes by the deadline doesn’t lead to jail time. But there are consequences.
Here’s what happens if you’re running late for your date with the IRS.
What happens when you don’t file a tax return?
It depends. If you are expecting a tax refund from the IRS, then there is no real “penalty” for not filing your return. BUT you won’t get your money back until you file, which means the longer you wait, the longer the IRS holds on to your check. You have three years to claim it before the statute of limitations says you don’t get it back (a.k.a. finders keepers for the IRS).
If you have a tax bill and you don’t file, you start immediately accruing a failure-to-file penalty. It starts at 5% of your total tax liability and keeps climbing to as much as 25%. If you still haven’t submitted that return within 60 days of the filing deadline, you’ll have to pay an additional $205 or 100% of your tax bill – whichever is less.
What happens when you don’t pay your tax bill?
If you filed a tax return but you didn’t pay what you owe, you will be charged a fee for late payment. This is typically around 0.25% of your tax bill for each month that it was late. Plus interest to the tune of 5%.
What happens if you can’t pay your bill?
If you owe the IRS money and worry you can’t afford to pay the bill, you might be tempted to not file a tax return. Hold up, this is not the answer! The IRS could garnish your wages or take other actions against you to get what back what you owe. So the best thing you can do is to be proactive and set up a tax payment plan with the IRS.
What happens if you don’t pay estimated taxes?
(This one is for you, self-employed bosses!) Since you work for yourself and nobody else, you are responsible for paying 100% of your liability (re: quarterly estimated tax payments). If you owe $1,000 or more and you miss your deadline to pay, you could incur a fee for underpayment. The amount depends on your liability and how late you are. If you could use a reminder when it’s time to slay your self-employment taxes, TaxSlayer will have your back.
What to do if you can’t file on time?
If you’re not ready to finish your taxes by the IRS filing deadline, file IRS Form 4868 instead and request a six-month extension. You can submit it online with TaxSlayer or it through the mail. FYI: if you mail it in, it takes longer for the IRS to receive it.
This post is sponsored by TaxSlayer®
