This year’s tax season has been a lot like that movie ‘The Never-Ending Story’. It goes on forever, I have no idea what is going on, and halfway through I want it to end. We will most assuredly be talking about this year and using it as a benchmark for miserable for the rest of our lives. The good news, to those of us who prepare taxes, is that this tax season is finally coming to an end! The 2019 extension deadline is October 15th.
A common misconception of the extension is that it extends the time in which you have to pay the tax you owe. An extension is only good for the filing of the return. The tax you owe is still due April 15th in a normal year. This year, however, there was an automatic extension, including to pay, for everyone thanks to the ‘Rona.
So, what is the penalty for not paying your taxes by the due date? The IRS late-payment penalty is .5% per month of the outstanding tax not paid by the deadline. The maximum penalty is 25% of the tax you owe! Then on top of that, they are kind enough to charge you interest on the unpaid balance as well.
If the extension does not help you with the taxes due, how does it help you? In addition to the late-payment penalty, there is also a failure to file penalty. This is what the extension can protect you from. The failure to file penalty for individuals is 5% of the amount due for every month (or partial month) your tax return is late. The maximum penalty is capped at 25% of the tax you owe! So, if you return is filed one day late, the penalty is 5% of the tax owed. If its 1 month and 1 day late, 10%.
There are a few options for penalty relief, but your best bet is to simply bite the bullet and file the return. The extension gives you until October 15th to do that. Get your information put together as best you can and go see a CPA to help you get them done by the deadline, but you better hurry, because we are all excited for this season to end!