What are the penalties for filing a late tax return?

The deadline to file taxes this year is Monday, April 15, 2019, but Maryland residents receive an extra two days to file. While this might seem like plenty of time to get your tax documents in order, thousands of people across the United States will miss the deadline.

Luckily, there is no penalty for filing your taxes late if you are expecting a refund because penalties are dependent on the money you owe. However, there can be severe financial penalties for Americans who file a late return and fail to make a payment on the taxes they owe.

Two types of penalties

According to the Internal Revenue Service (IRS), penalties depend on two reasons: filing late and paying late. The penalty for filing late is anywhere from 5 percent to 25 percent of the taxes you owe for each month they remain unpaid. However, if you wait longer than 60 days after the deadline to file your tax return, you will pay a minimum penalty of $205 or 100 percent of the taxes you owe, depending on which is the lesser amount.

Similarly, if your payment is late, the penalty is 5 percent on the taxes you each month they are not paid. However, if you both file late and pay your taxes late, you will only have to pay the 5 percent penalty for filing late. If you file your late return and still do not pay the taxes you owe, you will start incurring the 5 percent penalty on the taxes that remain unpaid.

How to request an extension

Extensions allow taxpayers to receive an automatic six-month filing extension. It is important to note that while this will reduce the penalties for late filing, it does not provide an extension for late payments. Therefore, taxpayers should estimate the taxes they owe and send in their payment with their extension request in order to avoid paying penalties on late payments.

The IRS reported that over 10 million taxpayers requested extensions last year. The deadline to file an extension is the same day that normal tax returns are due. For individuals, the form to file an extension request is Form 4868.

Facing unpaid taxes can be daunting, especially if interest is accumulating. If you have back taxes or filing concerns, consult with an experienced tax law attorney to discuss your next steps.

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