It's tax time. Like clobberin' time, only significantly less fun. We're coming down to the wire, which means two things. First, 'tis the season for IRS scam calls, so be vigilant. And second, it means you may be looking at your taxes, then at the calendar, then at your taxes again and realizing there's no two ways about it: You're going to be filing late. Filing late, like many things to do with taxes, can be scary. But we're about to break down just what can happen if you file your taxes late, especially if you're getting a refund.
Let's get to the good news fast. If the IRS owes you a refund, there's no penalty for filing your 2017 taxes after April 17. In fact, if you've got a refund coming, you have several years beyond the April 17 deadline to file, according to TurboTax. That means unless you file an extension, you'll have until April 18, 2021, to file your 2017 taxes and claim your refund. The only thing that would happen to you after April 18, 2021 (or October 15, 2021, if you request an extension), is that you'll forfeit your refund to the U.S. Treasury, TurboTax reported.
If that seems too easy, well, things get more complicated if you owe money to the IRS. Sometimes, whether you owe money or not, there's just no way around filing late. You may not have computer access, you may be struggling to get paperwork from an employer or freelance client, or everything just may have gotten away from you.
I can't keep this from sounding ominous, so I'm going to lay it out straight: If you owe money and file late, you can rack up significant late filing and late payment charges. Tobie Stanger, a Consumer Reports money editor, told 6ABC that if you owe money, "[h]ands down, the most important thing — no matter how much you can or cannot pay — is to file your tax return on time."
According to TurboTax, if you owe the IRS and you don't file your return (or an extension) by April 17, 2018, you'll incur a late-filing penalty of 5 percent of your taxes owed each month, up to a maximum of 25 percent of your taxes owed. Unfortunately, filing on time can't save you from late payment penalties if you're unable to pay your taxes owed by April 17 (no extension can be had here, TurboTax reported). Late payment penalties means you'll incur an interest charge of 0.5 percent of the taxes owed for every month that amount is unpaid.
However, there is some slight good news. "For any month(s) in which both the late-payment and late-filing penalties apply, the 0.5% [sic] late-payment penalty is waived," TurboTax reported. Cool beans. But also, interest starts accumulating on your unpaid taxes one day after the due date of the return. It's compounded daily, and the current rate is 4.18 percent (which TurboTax cautioned is subject to change).
All of this is overwhelming, but the actionable steps here start with getting your return in on time. If you're totally unable to get them filed by April 17, file for an extension, but remember the taxes you owe will begin accumulating late penalties after April 17, not after your later filing date.
After you've filed your return or filed for an extension, "face the problem head on," Stanger advised. "The IRS has payment plans that may very well help you in your particular financial situation."
Getting in contact with the IRS ASAP and letting folks there know how much you owe, how much you can afford to pay each month, and your general overall financial situation can be hugely helpful for staying on top of things. You'll incur the charges mentioned above, but if you're communicative and you file your return and make payments on time, you'll save yourself a lot of trouble.
To the lucky folks who have an incoming refund, you get a lot of leniency with your taxes, but even if you do have until 2021 to file, file as soon as you can to stay on top of things and get ready for next year's tax season, which, believe me, will be here too soon.