Friday, March 12, 2010

What you need to know about failing to file a tax return

Not filing your taxes is no small matter. The government considers it a criminal offense. Penalties can be assessed for filing your taxes late, not filing your taxes at all and/or not paying your taxes. Late filing will give the least amount of overdue fees. In a worst case scenario, the government can pursue you criminally for failing to file a tax return. A 5% monthly interest charge will be added to your total tax due. The IRS can charge you up to a maximum 25% penalty.

What are your options if you are absolutely not ready to file a tax return come April 15? Well, if you find yourself unable to file your taxes come April 15, simply file for an extension. To achieve this, you will need to fill out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax return. If approved, this extension gives you until October 15 to file your taxes.

Don’t wipe your brow in a sigh of relief about the extra six-months to file yet, let me tell you about the fine print: Filing for an extension only gives you extra time to get your paperwork into the IRS—it does not extend the time you have to pay any tax due. All tax payments are due on April 15 or you will be subject to penalty. Thus, by April 15, you need to pay at least 90% of what is due.

So what’s my rule of thumb? I think the wisest thing to do is to file your tax return early, start a filing system now to hold all your tax documents, so that next year, you will be ready to file as soon as tax season begins. In the unfortunate circumstance that you are not able to file early or by the deadline, filing something is better than not filing anything at all. Therefore, if you can’t file your return, file for an extension. And if you know you will have a tax bill, pay whatever you can on April 15.

See What Are the Consequences for Not Filing Your Taxes? | Darrin Mish, Tampa Tax Attorney - JDSupra

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