Most working Americans must file tax returns every year. Those who fail to do so may face serious repercussions. If you have yet to file your tax return and the deadline has passed, you may be wondering how to handle the situation and fulfill your obligations as soon as possible.
How you should proceed when dealing with a late tax return depends on whether you requested an extension for it. Unless you file for an extension, you may face late-filing penalties that may reach as high as 5% of what you owe each month. If your return is more than six months late, you may face penalties that amount to either $100 a month or 100% of the tax you owe on your return, depending on which figure is lower.
How extensions work
When you file for an extension on your tax return, you may be able to avoid penalties and give yourself more time to get your affairs together. Keep in mind that filing for an extension does not mean you have more time to pay what you owe. Instead, it simply means you have more time to file the actual paperwork.
How the process works without an extension
If you did not request an extension on your tax return, the next steps depend on whether you need to make a payment or whether the IRS owes you a refund. If you owe money, plan on paying a late penalty of somewhere around 0.5% monthly until you cover the entire debt. You may also have to pay interest on the amount past due in addition to the 5% penalty assessed on the remaining balance.
However, if the IRS owes you money, you may not have to pay federal penalties associated with filing late. State taxes may work differently, though, and you may still have obligations in this area. Failing to satisfy them may lead to additional repercussions and hardships.