It’s no surprise – it happens every year at the same time. On or around April 15th (varies slightly depending if it falls on a weekend), your income tax return and any remaining payment are due. This is also the due date to file an extension (which gives you six additional months to file, not pay). Although the deadlines for filing and paying any taxes owed are the same, the penalties for missing those deadlines are not. The short version is: file on time, even if you can’t pay. The penalty for filing late is worse than the penalty for paying late.
Let’s walk through a quick example: say you owe $1,000 in taxes but you’re short on cash because of some unexpected expenses over the last few months.
If you file your taxes on time, but don’t pay them until June 15th (a little under two months late) you’ll likely owe about $15 in late fees. Late payments accrue a penalty of one-half of one percent (0.5%) of the amount owed per month, or part of the month, that you’re late. Part of April, all of May, and part of June means 3 months of $5 penalties (0.5% of $1000), or $15.
But if you don’t FILE on time and choose to both file and pay on June 15th you’ll probably owe about $150 in fees. That’s because late filings accrue a much bigger penalty of 5% a month. (5% of $1000 is $50/month for 3 months).
That’s not a small difference: $15 if you file on time but pay late, $150 if you file late and pay late. (Interest accrues on the amount owed too, but that happens whether you file on time or not so that applies to both options and we’re ignoring it for now.) If you are worried about paying your taxes on time this year do what you can to minimize the fees and interest. First, file your taxes (or at least file an extension) by the April deadline. Then explore the IRS payment options here on the IRS website.