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The deadline for your 2014 filing is right around the corner. Here’s why you need to file even if you can foot the bill to the IRS.
You should absolutely file a tax return by the deadline every year, regardless of your current financial situation.
For one thing, you might not owe any money and may even have a refund coming. But even if you know that’s not the case, you should still file to minimize penalties and interest charges that can quickly add up to hundreds of dollars.
Fact: About 12 million people each year ask the IRS for an extension to file their taxes.
If you don’t pay in full by the Tax Day deadline, you’ll owe interest charges on the unpaid amount: 3 percent per year, compounded daily, and a late payment penalty of 0.5 percent for each month you wait. That’s true even if you request an extension to file your taxes. Extensions apply to the paperwork, not to paying the bill.
For example, if you owe $1,000 and fail to pay anything until Oct. 15, you’ll owe an extra $60 or so. But you would still be better off than someone who didn’t submit anything at all to the IRS.
In that case, you’ll get hit with a late-payment penalty of 5 percent per month. That would add another $300 to the bill after six months. (This penalty doesn’t apply if you’re due a refund. Uncle Sam is happy to hold onto your money until you can be bothered to claim it.)
The good news is the IRS does put a cap on these penalties ― the maximum total penalty for failure to file and pay is 47.5 percent. Just filing on time brings that maximum penalty down to 25 percent.
Article last modified on January 9, 2019. Published by Debt.com, LLC . Mobile users may also access the AMP Version: If I’m Unable to Pay Taxes Should I File Anyway? - AMP.