Wednesday, Apr. 06, 2011

Failing to File Your Tax Return on Time

This year, taxpayers have a few extra days to get their federal income tax returns to the IRS. Tax Day is officially April 18, 2011, thanks to Emancipation Day, which this year is being celebrated in D.C. on April 15. Still can't make April 18? Maybe you just file for an extension. Or you just file late and see what happens.

Likely consequence: It's certainly better to file your tax return late than not at all. That said, if you owe taxes and don't file your return on time, you can be subject to interest and a penalty: the total late-filing penalty is usually 5% of the tax owed for each month up to five months. But once you are late more than two months, you are guaranteed to owe a penalty of at least $135 or 100% of your back taxes, if the latter is the lower amount. You can avoid this late fee if you file an extension. But even if you do that, you will still owe a "failure to pay" penalty, which is assessed monthly and is equal to 0.5% of your back taxes for every month you are late.