Penalty for Filing Taxes Late and Tax Filing Extensions
If you work, there’s a good chance you have to file your taxes every year. Since there is a penalty for filing taxes late, getting a tax filing extension can come in handy. Let’s take a closer look at how to get a tax filing extension and how to avoid filing your taxes late.
How filing taxes works
Whether you’re a salaried or hourly employee or an independent contractor or business owner, you’ll need to fill out IRS Form 1040. This form will allow you to report your income and tax deductions. You’ll include the money you earned from all sources, such as wages, salary, tips, business income, and Social Security benefits.
Depending on your situation, you might also be able to claim deductions that reduce your total taxable income. Your income minus deductions will equal your adjusted gross income, which is the income that you’ll need to pay taxes on.
If you live in a state that requires income taxes, you’ll likely file your federal returns along with your state returns. You might use a tax software and file your returns on your own or hire an accountant or other tax preparer to do so for you.
Is there a penalty for filing taxes late?
Unfortunately, there is a penalty for filing taxes late. This penalty is usually 5% of the taxes you owe for each month your return is late. If your return is more than 60 days late, you’ll be responsible for a minimum penalty of $435 (for tax returns required to be filed in 2020) or the tax you owe, whichever is less. Since filing taxes late can cost you a lot, you’ll want to meet the deadline, which is usually April for most taxpayers.
Can I get a tax filing extension?
The good news is a tax filing extension can help you avoid a penalty. It will give you six extra months to file your taxes. As long as you request an IRS tax filing extension, your deadline will be pushed from April to October. Keep in mind that even if you file an extension, you’ll still be responsible for any taxes you actually owe.
How to get a tax filing extension
To extend your tax filing deadline, you’ll need to fill out Form 4868. It will ask you for your name, address, Social Security number, an estimate of how much taxes you owe, and what you have already paid. There are several ways to complete Form 4868, including:
- Visit Free File on IRS.gov and fill out the form online.
- Use your tax software and receive step-by-steps that will guide you through the process.
- Ask your tax preparer to file an extension for you.
- Print out the form and mail it to the IRS.
To get the extension, the IRS requires that you must estimate your tax liability on the form and you should also pay any amount due. Make sure you file your tax extension by the same day your tax return is due. Your tax filing extension deadline for this year will likely be April 18, 2022.
How to avoid filing your taxes late
To avoid a penalty for filing taxes late, follow these tips:
Start the filing process early
If you wait until the last minute to file your taxes, you may not be able to finish on time. If possible, try to start the process at the beginning of the year, in January or February.
Pay what you can
It’s better to pay some of your tax bill than none of it. You may want to sign up for an IRS payment plan, such as the short-term payment plan or installment agreement if you need more time.
Consider getting a loan
With a personal loan, you can receive the funds you need to pay for your taxes. It’s a quick and easy way to meet your tax requirements and avoid the penalty.
Get extra financial help this year
If you’re getting a tax refund this year but still need extra funds, Advance America can help. We offer a variety of online personal loans you can use to cover expenses, including payday loans, installment loans, title loans, and lines of credit. You may apply online or in store and get your money quickly, sometimes the same day you apply or within 24 hours. Better yet, you may not need good credit to get approved. Visit Advance America today to learn more about the loans we offer.