It’s April 15th And I Haven’t Done My Taxes
For many Americans, Tax Day causes so much anxiety that they procrastinate beyond April 15th. On Friday, April 12th, the IRS told the Washington Post that 50 million taxpayers hadn’t filed their returns, yet.
If you haven’t done your taxes yet, you need to get started immediately. Don’t freak out. The IRS isn’t sending authorities to your home or business to arrest you. You do need to file your returns as soon as possible so you can avoid excessive fines, though.
Follow these steps so you can file and pay your 2018 tax returns before your fines become unaffordable.
Determine Whether You Need to File by April 15th
Not everyone needs to file their tax returns by April 15th. If you live in Maine or Massachusetts, you can wait until April 17th because the states celebrate Patriots Day. Residents of Maine and Massachusetts shouldn’t wait until the 17th to get started. You might want to use your day off to wrap up your tax documents.
Other Special Cases That Don’t Need to File on April 15th
The government recognizes a few other special cases that don’t need to file by April 15th. These special cases include:
- Members of the military serving in a combat zone (they must file within 180 days of leaving the combat zone).
- Citizens living outside of the country or its territories (they must file and pay by June 17th).
- People affected by federally declared disasters like the California wildfires and Hurricane Florence (the IRS website lists eligible disaster situations).
If you don’t fall into one of those categories, then you need to start working on your returns right now.
What Fines Do Late-Filers Pay?
The IRS has a rather complicated list of fines and fees that late-filers need to pay. How much you get fined depends on things like whether you failed to pay, whether you failed to file, or whether you didn’t pay your quarterly estimated taxes. That last situation usually applies to small business owners, so you probably don’t have to worry about that unless you have a side gig or own a company.
Since the IRS site has some confusing language, you can focus on common penalties like:
- Paying a 5% fine per month (up to 25%) for not filing your tax forms.
- Paying a minimum $135 extra for filing your returns more than 670 days late.
- Paying a 0.5% penalty each month (up 20 25%) for not paying your taxes (even though you filed your return.
- Paying interest on your unpaid taxes (the rate varies by month).
As you can probably tell, the penalties get more expensive over time, so you need to get those forms and checks in the mail ASAP.
Other Penalties You Could Face
As long as you don’t commit tax fraud by intentionally provided false information, the IRS doesn’t want to prosecute you. The government wants to get money from you. It doesn’t want to spend a lot of money going to court and keeping you in jail.
After several years of negligence, though, the IRS will target you to get its money. Some penalties that you could face include:
- Losing your passport.
- Losing your Social Security benefits.
- Getting a tax lien that makes it impossible for you to sell property.
Given enough time, the IRS will press charges, which means you could spend time in jail or prison. Remember, though, that the government doesn’t want to start a court case over someone who forgot or didn’t pay their taxes on time. You have to avoid tax payments for years before the IRS will consider that option.
What Can You Do Now to Improve Your Situation?
Even if you don’t have enough money to pay your taxes, you need to take steps that will lower your fines by as much as possible.
Start by completing an extension form. Getting an extension means that you won’t pay fines for failing to file your returns. The IRS will still charge you fines for late payment. Still, you improve your situation by giving yourself some breathing room to finish your tax return correctly.
The IRS also has options for people who don’t have enough money to pay their taxes.
Pay With Your Credit Card
Did you know that you can use a credit or debit card to pay your taxes? Unfortunately, using your credit card can cost quite a bit. In addition to your credit card’s interest rate, you need to pay a processing fee of at least 1.87%.
Paying with a credit card can work well for people who don’t owe much. If you owe the IRS a lot of money, though, your interest payments can quickly become more expensive than fines from the IRS. Still, if you’d rather owe your credit card company than the IRS, it’s an option worth thinking about.
Request a Payment Plan From the IRS
The IRS will set up a plan that helps you pay your taxes. As long as you pay the full amount within 120 days, you can avoid the setup fee. You will, however, still have to pay some interest on the balance.
Payment plans that take longer than 120 days have setup fees ranging from $31 to $225. Low-income individuals can avoid these fees. Regardless, though, you will pay interest. Unless you’re a special case, you will pay interest. The IRS isn’t going to let you pay late without some penalty.
Ideally, you should pay your federal taxes before Tax Day. If you don’t have your returns ready by April 15th, you should take action immediately to keep your fines and penalties as low as possible. The sooner you reach out to the IRS, the fewer fines you will face.