Here’s a question some of you might be wondering: “What if I don’t file my taxes on time?”
We are all busy people, and tax laws are very complicated. You might not have found the time to complete your taxes and you realize now that the deadline is in five days (April 17th, 2012). You’re gonna need some options.
Luckily you have a bunch of options. Here they are, in order of best to worst.
And before we get into these items, note that if the IRS owes you a refund then you will not be penalized at all for filing late. Just make sure to file at some point. The government isn’t going to hunt you down when they owe you money; they only do that if you owe them money.
Now for your options if you owe the government:
Work Your Butt Off and File Before April 17th
You still have time to get your return in on time. If you really need help you can try an accountant or a tax service place like HR Block. I’ve never used any of these places so I can’t recommend any, but if I were to pay someone to do my taxes I’d personally go to an accountant instead of a chain provider like HR Block.
You can also software to help you file like Turbo Tax or Tax Slayer. I personally use Tax Slayer because it’s cheaper and does everything I need.
If you can get it in on time, great. If not, move onto the next option:
File an Extension and Submit a Payment
Remember when you were in school and you had that one really nice teacher. If you didn’t finish your homework on time you just had to ask her for an extension and she would grant it without even asking any questions.
The IRS is pretty much the same way. If you ask for an extension (by filing Form 4868), you get a six month extension on paying your taxes.
This will allow you to avoid the 5% per month (max of 25% total) “Failure to File” penalty. This penalty is based off the tax you owe. For example, if you file your tax return late with a total tax bill of $5,000 and you only had $3,000 withheld last year, you will pay a 5% penalty on the $2,000 you still owe the IRS for each month you are late instead of the $5,000 total bill.
However, an extension doesn’t get you completely off the hook. You’ll still have to pay a “failure to pay” penalty, which is 0.5% of what you owe plus interest every month you don’t pay. It’s not a particularly large penalty,but who wants to pay the government any more than you have to?
That’s where the payment comes in. You can submit a payment with your extension for an amount that you think will cover anything you owe. Let’s pretend you’ve already had $3,000 withheld and you think you’ll end up owing another $2,000. You can send in $2,000 along with the extension. Then if you finish your taxes and find you only owe $1,500 more, the IRS will refund you $500 and you won’t pay anything in penalties.
File an Extension Without a Payment
If you don’t have the money to send in a payment then that’s fine. You’re still better off filing the extension so you avoid that hefty 5% per month penalty. Sure you’ll get hit with some interest and failure to pay fees, but those are tiny compared to the failure to file fees.
Once you get the extension, it’s important to finish your taxes as quickly as possible. The longer you wait, the more you’ll pay in penalties. Remember that you can make payments if you don’t have the money to pay your full tax bill right now. If you pay the whole balance within 120 from filing, you aren’t charged a fee for the service. If you don’t get everything paid off in 120 days, you’ll pay a fee of up to $105.
Don’t File Anything
If you don’t feel like doing anything, then don’t file anything. You’ll get hit with big penalties and interest, and eventually the IRS is going to find you and demand their money. If you don’t have the money then they can prosecute you and put you in jail.
This is a really bad idea. If you can’t get your taxes done before the deadline, file an extension and figure out how to pay your taxes.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
It’s all a scam if you ask me.
My taxes are so simple I use the free H&R Block program. It’s a breeze and I get it done in no time.
Hi Kevin! I actually had no idea that I don’t get penalized if the government owes me money – that’s great! I ran into an awkward situation with my State vs. Federal taxes this year where my Federal was accepted but my state was rejected! I filed like 5 times (after fixing the said error of course) and they still said it was wrong so Turbotax told me to file by mail (raincloud). Anyways, besides recommending that I get my butt in gear and file my taxes, do you have any recommendations for filing taxes? I’m wondering at this point if I should have just had H&R block do it instead…thanks!
With our daycare and business expenses, we almost always get a refund. This allows us to be lazy bums and file an extension every year. It’s probably not the best practice since it delays getting us our money. But it does help to take stress off the beginning of the year. My husband has an S-corp, so our taxes are usually more complicated.
This was the first filing year since college that my taxes were simple. One W4, done, and done.
Doing nothing is never a good choice! The IRS does not care about your personal circumstances because they feel it is your responsibility. So step up and do your best.
the last few years, i have always done my taxes as close to Jan 31st, as possible– because I want to get my hands on the refund check.
but this year we are trying to get into as much self employment as possible, and it may not work out quite so well for us. the article has some great info on filing an extension, and i will bookmark it in case we need it..
Even if the IRS owes you money and you don’t file, often they will calculate your taxes for you. When they do this, you are almost certainly going to owe by their caluclations. It’s better off just to deal with it. I have used H&R block and they will take their fees out of your refund. So, even if you are broke and lazy, you can still get it done.