Uncle Sam will not come against you with its host if you file your tax after the tax day. However, you can reduce your penalty by getting it right and avoiding errors, especially when your filing is late.
Here are some mistakes you should avoid:
Not Doing Anything
Uncle Sam has no issue with people who plan to file after the tax deadline. However, it would be best if you did it right by going for a tax extension through Form 4868 for extra time. Also, such tax extensions should be requested before the tax filing deadline.
Not doing this subjects you to a late filing fee of 5% tax amount for every month you default with a maximum of 25% for the tax due. With this, a tax debt of $2000 could amount to $500 in penalty.
Assuming You only Owe taxes
When you pay after the deadline, you will pay more since there will be interest on all outstanding debt, even with an extension. The late payment penalty fee is placed at 0.5% per month of the outstanding debt not paid by the tax deadline.
However, paying 90% of your entire tax liability by the deadline can get you some tax break, with the rest paid after paying your return.
In summary, for your tax debt, make sure to pay as much as possible when you ask for extra time.
The assumption that an Extension is Compulsory
There are cases when Uncle Sam is generous enough to grant you an extension even if you don't ask for it. Ignorance of such rules could be costly in terms of money and resources.
This applies to American residents or citizens that lived and worked outside US soil by the tax deadline. These sets of people get an automatic extension to file their taxes without asking for an extension.
Also, if you were the victim of some natural disaster, you have automatic extra time to file and pay. Uncle Sam has a list of disasters that qualify, which is available online. Some military members also get automatic extensions depending on their location and specific assignment.
Assuming You Need Six Extra Months to Get Your Act Together
The extension you get from Uncle Sam gives you six extra months to take care of your tax return, which places your tax deadline at mid-October. However, people that got an automatic extension do not have up to six months to settle their tax debt.
For instance, you get just two extra months to file if you are outside the US because of work. Also, for victims of natural disasters, their time varies based on the nature of such a disaster.
There are situations in which military members get above six months.
Not Keeping Your Extension Deadline in Mind
Even when you get an extension, missing it is a terrible idea as you could get up to a 5% penalty for late filing.
For people who filed so late and reached up to 60 days, Uncle Sam will demand either $435 or your tax debt, adjusted for inflation. This will be in addition to what you owe.
On the bright side, you might have a lifeline from Uncle Sam which means Uncle Sam might waive the penalty if there is a "reasonable explanation" for the missed deadline, attached via writing to your tax return.
Assuming Uncle Sam will hate You
You need not feel that Uncle Sam is out to get you, so there is no need to rush to meet the deadline assuming that the IRS will send its host against you, or you will lose some privileges for asking for an extension.
Filing late is not a big deal, but pretty common, especially with a series of investors who do not have access to their K-1 until after the tax deadline, yet such a document is essential to tax filing as it states their income.
Filing late will not make you lose anything, provided you requested an extension.
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Tiffany Gaskin