Tax Filing Deadline Approaches: Avoid Penalties by Filing Soon

WASHINGTON, D.C. — With less than a week remaining until the April 15 tax filing deadline, the Internal Revenue Service (IRS) has reported that nearly 90 million federal tax returns have been filed as of March 28. As the deadline looms, taxpayers who have yet to file are urged to do so to avoid costly penalties.

Failure to file a tax return by the deadline could result in significant penalties if taxes are owed. Missing the deadline incurs a 5% penalty on unpaid taxes for each month the return is late, capping at 25%. Additionally, if the penalty is less than $510 and the return is over 60 days late, a minimum penalty of $510 will be applied.

“If you have a balance due, don’t file late because you will compound your problems,” said Jim Buttonow, a CPA based in North Carolina. Taxpayers can avoid late penalties by applying for an extension, which must be submitted by Tuesday, allowing for an automatic six-month extension.

Even if an extension is filed, any taxes owed still must be paid by April 15 to prevent an additional penalty of 0.5% per month on the unpaid balance until the taxes are settled.

In an alarming scenario, if a tax return is not filed at all, the IRS has the authority to prepare a “substitute” return based on third-party income reports. This means taxpayers may miss out on deductions and credits, resulting in a higher tax liability. “That return will not have all the deductions or credits a taxpayer is entitled to,” said Misty Erickson, tax content manager at the National Association of Tax Professionals.

For those who are owed refunds, failing to file can lead to the loss of potential refunds. The IRS has announced over $1 billion in unclaimed refunds from 2021, and April 15 marks the final opportunity this year to file and claim those refunds.

Self-employed individuals must also consider that not filing means their income won’t be reported to the Social Security Administration, impacting their future benefits. Furthermore, for those seeking loans, having a recent tax return is often necessary and may influence the approval process.

As the deadline draws closer, the IRS advises individuals to pay as much as possible by April 15 to mitigate penalties and interest. Taxpayers struggling with payments are encouraged to consult with tax professionals to explore available options.