Taxes Are Due in Two Weeks. Remain Calm
Still haven’t done your taxes? The April 15th deadline is approaching soon, and The Wall Street Journal has some last-minute tax tips for us. Perhaps you had a bunch of 1099s this year and didn’t pay estimated taxes like Josh told you to. Remain calm:
Surprised by what you owe? If you can’t pay it, don’t ignore it. Although the current interest rate on unpaid tax is 3% a year, late-filing or late-payment penalties, or both, can rapidly mount up.
The late-payment penalty can be 0.5% a month (in addition to interest), beginning after April 15. If your unpaid tax is $50,000 or less, you may qualify for a simplified “online payment agreement” at IRS.gov that can be used to schedule payments.
If you don’t file a tax return at all, the penalty is normally 5% a month, capped at 25%.
The upshot is that the later you act, the more you will probably owe. And if you file more than 60 days after the return was due, the minimum penalty is $135 or 100% of the unpaid tax—whichever is smaller.
Note: While the IRS sometimes rescinds penalties for reasonable cause, it is unlikely to do so for interest.
The WSJ also reminds us that it’s impossible to run from the IRS, so don’t try that. But really, if you can’t pay your taxes now, see if you qualify for an online payment agreement in which you can slowly pay your taxes back on a monthly basis (individuals generally qualify if they owe less than $50,000). This would be a better solution than putting your taxes on a high interest credit card.