Even if you request an extension, you are not exempt from paying your tax tab
This year has been an unusual one for filers due to the coronavirus pandemic, which led the Trump administration to postpone the filing deadline for the first time ever.
The administration confirmed that returns are due by July 15 and there won’t be another postponement.
Failure to comply with tax laws could result in penalties and interest.
Here’s a look at some penalties to watch out for:
Failure to file
If you don’t file your return, the penalty is 5 percent of the unpaid taxes for each month that a return is late. The penalty begins accruing the day after returns are due – up to a maximum of 25 percent of your unpaid taxes.
The amount is reduced by the failure to pay penalty amount during a month where both penalties apply – the maximum penalty you’ll pay for both in any given month is 5 percent.
When a return is filed more than 60 days after the deadline, it is subject to a minimum late filing penalty that is the lesser of either 100 percent of the tax required to be shown on the return that was not paid on time, or a specific dollar amount that has been adjusted for inflation.
The penalty applies for a full month, even if it is less than 30 days late.
The IRS recommends filing your return, even if you cannot pay everything you owe by the due date.
Failure to pay
If you fail to pay your taxes by July 15, the penalty is 0.5 percent of the taxes not paid.
The penalty is weighed each month after the due date until the bill is paid or the levy reaches 25 percent of unpaid taxes.
Even if you request an extension, you are not exempt from paying your tax tab. You are liable for penalties if you don’t pay an estimate (at least 90 percent) of your tax liability by July 15.
Failure to pay proper estimated tax
This penalty applies to people who did not pay a sufficient amount in taxes throughout the year.
According to the IRS, penalties are calculated separately for each required installment, based on the number of days late, multiplied by the effective interest rate for the installment period. The penalty is applied to what you should have paid.
One thing taxpayers won’t have to worry about this year is taking their required minimum distributions, because the CARES Act allowed some individuals to skip taking that withdrawal in 2020.