With tax day just a few days away, the race is on to get tax return in the mail or electronic file by the due date. Tax interest and penalties for not filing a tax return on time or not paying what you owe the IRS can really hurt you.
If you are due a refund and file a late tax return, there is no penalty. If you owe tax and you are not filing and paying on time, you will most likely owe interest and penalties on the tax you pay late. If you want to keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Whether you are filing the tax on your own or hiring some small business tax preparation services, if you don’t pay attention to deadlines and details, you can multiply the amount of tax due.
It sounds difficult but it’s easy to avoid the situation. No one wants to get stuck in a tough spot with IRS payment. Here’s what you need to know.
Request an extension
You can request for more time to file your tax return but you must submit the proper form. You can request an automatic six-month extension. The best way to get an extension is requesting it electronically. This is the fastest and easiest way to get an extra time to file the taxes. Use the IRS free file to submit form 4868 regardless of your income or you can take help of tax preparation Services Company.
Pay any amount due
Requesting an extension does not mean you get more time to pay any amount due. You must pay any amount due and estimate your tax liability on Form 4868. Electronic payment using IRS direct way is the best method to pay up.
Take care of your time
No matter you are filing your own or some small business tax preparation services is guiding you, you should watch the clock. Payments are still due by the original deadline. You should request an extension or file a tax return even if you are not able to pay the full amount to avoid a costly late-filing penalty.
Two penalties may apply
If you are late to file your tax, you will have to apply two penalties. One penalty is for filing late and one if for paying late. Interest grows on top of the penalties. If you file your 2017 tax return more than 2 months after the due date, the minimum penalty is $205 or, if you owe less than $205, 100% of the unpaid tax. The penalty is generally 0.5% of your unpaid taxes per month and can build up to as much as 25% of your unpaid taxes.
Do your best
If you want to reduce the amount subject to interest and penalty charges, you should pay as much as you can. Currently, the interest rate is 4% per year, compound daily. The late filing penalty is 5% per month and the late payment penalty is 0.5% per month.
Make a plan
You may be eligible to make monthly payments through an instalment agreement with the IRS. If your income is $50,000 or less in combined individual income tax, interest, and penalty, find out more and apply here.
Take the help of professionals
If you find difficult to file your tax return or some important things you are not aware of, it’s always better to consult some tax professionals. Small business tax preparation services can guide you and provide you timely and accurate advice that keeps you in peace while every shifting tax requirements.