So, you’ve been procrastinating.
Even though the Feds gave you three more days. Because Friday was a holiday, they extended the deadline to file (yet again).
But, today- the 18th of April is it.
You have got to get your taxes in today. Otherwise, you are subject to a failure to file penalty. That is 5% of the amount of money you owe per month- up to a maximum of 25% of the amount due.
Of course, if you owe money, there’s a failure to pay penalty, too. But, that’s a lower amount- to the tune of 0.5% of the amount of money owed per month you are late paying, up to a maximum of 25% of the amount due.
Now, here’s another issue. Filing an extension- Form 4868 for individuals or Form 7004 for corporations- only lets you have additional months to file your taxes. There is no extension afforded you if you owe taxes. So, that failure to pay penalty obtains.
There is a way around that failure to pay penalty, though. If you have paid- via withholding and extensions- 102% of the amount of taxes that were due last year, you can obviate the penalty.
But, let’s explain that a little more- because if you like many of our clients- you may not get it.
As you can see from the diagram above, John Doe owed $ 39,928 in taxes last year. And, his withholdings and estimated payments didn’t cover the total. So, a payment of $ 3116 was due.
For John not to have a failure to pay penalty, he needed to submit $ 40726.56 (actually $ 40727) to the IRS. That can come from a combination of withholding, estimated payments, or a payment sent along with the extension to file form. If John’s withholdings in 2021 were $ 40,000, a check for $727 (or a credit card payment to PayUSAtax.com, which costs more than $ 727) will prevent a failure to pay penalty to accrue to his account.
In case you are going to extend your tax filing, here are the links to the forms you need.
Form 4868, Individuals Form 7004, Corporations
Good luck!
