April 15. The date stirs feelings of dread and anxiety in working Americans nationwide, and with good reason. Between gathering your W-2s, finding all of your receipts and financial records, and filling out your tax forms, doing your taxes can be an ordeal. No wonder people tend to wait until the last possible moment to file their taxes. In fact, the Internal Revenue Service (IRS) reports that more than 20 percent of Americans wait until the last week to file their taxes [source: Reuters]. These people typically have more complicated returns as well, adding to their stress as the tax deadline draws near.
While taxpayers might naturally be tempted to wait a few weeks after the deadline before filing, that decision could cost them. The IRS charges interest (compounded daily) at an annual rate equivalent to the federal short-term rate plus 3 percent on any unpaid taxes, starting from when payment is due until the payment is received. In addition to charging interest, the IRS also charges a penalty for filing late (5 percent of the amount owed for each month or partial month the payment is late, up to a total of 25 percent). Depending on the amount someone owes and how long he or she waits to pay, interest and penalties can mount up in a hurry.
If you need any more motivation to get started on your taxes early, the IRS notes that people who wait until the last minute to file typically make more mistakes on their returns. What kinds of mistakes? Read on to find out.