Today is the day. Tax Day. The bane of every American’s existence.
Every year, 80% of the population manages to get their returns in on time to receive their refund. It’s such a complicated and frustrating experience that most Americans wait until the deadline to get it done.
According to Ted Kurlowicz, tax professor at The American College of Financial Services, the best plan of action is to pay your taxes right away. People often miss the deadline because they didn’t have the money to pay by the deadline or they just ran out of time, an error that can get quite expensive.
“You should do the least harm and file as soon as possible and pay the tax as soon as possible,” said Kurlowicz during an interview with Fox Business. “The late-filing penalty could actually be higher than the late-tax-payment penalty so you should file as soon as possible to do the least harm to your personal finances.”
The amount you can pay if you’re late is 5% of what you owe each month, up to about 25% of the total. Moral of the story: if you don’t want to pay more than what you owe, don’t procrastinate!
What about the 20% of people who don’t file on time? Will the IRS come pounding on your door and threaten to haul you off to tax prison?
The simple answer is no. It’s okay to miss the deadline, but there are a few things you must do to stay compliant.
1) File an Extension.
If you need more time to get your taxes in, the government understands. Not everything works perfectly, even if you were 100% prepared to have your taxes prepared by the 17th. Maybe there was a problem with filing and they’re waiting for assistance. Sometimes it takes a little longer to get all your sources of income identified so you can complete your taxes on time.
Either way, the IRS has graciously offered an extension, giving you until October 15th. To take advantage of this, you must submit Form 4868 the moment you realize you might miss the due date.
While you have until October to send in your proofs, that doesn’t mean you have that long to pay what you owe. The due date to pay is still April 17th and they will expect you to pay at least 90% in order qualify for the extension or you will probably get hit with nasty interest and late fee charges.
2) Take the Situation Seriously
If you know you’re going to be late, the best thing you can do is be proactive. You know the tax man is going to come. They will not just forget you owe them money and leave you alone. They WILL come for you, but if you want to lessen the penalties/burden of paying late, then do everything you can to show you’re trying your hardest to remedy the problem.
Again, the IRS understands the things happen. Hardships come and go. As long as your open and honest about what’s going on, pay as much as you can, file an extension as early as possible, you can usually negotiate a settlement.
3) Get Help
Tax time is stressful for everyone, but it’s especially true if you’re unsure about whether you can pay on time. You might even have April 17th with skull and crossbones marked on your calendar drawn with a black Sharpie. If there’s any question or stress over filing (especially if you’re working a new job or started your own business and just aren’t sure), get help!
Yes, it will cost you a little bit, but not paying on time will cost you a lot more in the long run. There are thousands of amazing tax advisors out there, along with new software that makes filing easier than ever.