The IRS takes its deadlines seriously. That means that all tax returns, plus checks for any taxes owed, must be stamped or filed electronically by April 15 or bring on the penalties! But what if you don't have enough money to cover the taxes you owe? Should you postpone filing until you have the cash to cover your bill?
Here's what the IRS says:
- Always file on time, even if you can't pay the full amount that you owe. If you don't, you are charged a failure-to-file penalty of 5 percent of unpaid taxes for each month you are late, up to 25 percent of unpaid taxes.
- Pay what you can and contact the IRS to explore payment options.
- You will only be charged 1/2 of 1 percent of the balance you owe on your unpaid taxes each month. That's much better than the failure-to-file penalty.
The IRS does offer "automatic" filing extensions of up to six months, but you still have to file for an extension by April 15. Plus — and this is the most important detail — a filing extension is not a payment extension! You still have to pay any owed taxes — or your best estimation thereof — by April 15 [source: IRS]. You will be charged interest on any unpaid taxes after that date.
For lots more tax preparation tips and mind-blowing top 10 lists from HowStuffWorks, check out the links below.
Author's Note: 10 Worst Mistakes to Make On Your Taxes
Nobody hates Tax Day quite as much as the self-employed. As a freelance writer, I don't have a "boss," which is awesome 364 days of the year. The one benefit of having a boss is that your income taxes are subtly skimmed from each paycheck. In fact, it's easy to forget that you're paying taxes at all until April 15 rolls around and Uncle Sam owes you a big fat refund check. For us freelancers, the exact opposite is true. When we get paid, no taxes are withheld. Once the money is in the bank, we pay the mortgage and buy the groceries and think that everything is super-duper until Tax Day rolls around and — BAM! — we have to pay the entire year's taxes all at once. To be honest, that's the not the way it's supposed to work. In fact, the IRS insists that freelancers, contractors and other self-employed folks file quarterly estimated taxes. There's a small penalty if you don't, but the bigger punishment is writing a huge check in April for money that may or may not be in the bank. After years of April agony, we've finally boarded the estimated taxes train. Now our tax pain is spread out in four equally irritating installments. Thank you, IRS.
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