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As we approach tax season, it’s essential to file your taxes accurately and on time to avoid penalties and interest from the IRS. Missing the tax-filing deadline can result in additional fees and charges, so it’s crucial to stay informed and take the necessary steps to comply with tax regulations.
File by the Deadline to Avoid Penalties and Interest
While April 15 is the federal deadline for most taxpayers, filers in Maine and Massachusetts have until April 17 to file. It’s important to note that there are automatic extensions for taxpayers impacted by natural disasters, but if you owe a balance and skip the tax-filing deadline, you can expect penalties and interest from the IRS.
The IRS charges 5% of your unpaid taxes per month (or partial month) for failure-to-file, capped at 25% of your balance due. The late payment penalty is 0.5% per month (or partial month) with a maximum fee of 25% of unpaid taxes. Interest is based on current rates.
If you’re missing tax forms, the tax deadline is your last chance to file an extension, pushing the filing deadline to October 15. However, it’s important to remember that an extension to file is not an extension to pay, as advised by certified financial planner Sean Lovison, founder of Purpose Built Financial Services in the Philadelphia area.
The IRS offers options for those who can’t pay taxes by the deadline, such as applying for a payment plan or installment agreement to pay their balance over time.
Two-Thirds of Taxpayers Can Expect a Refund
Filing your taxes on time is crucial, as two out of every three taxpayers who file are actually owed a refund. As of April 5, the IRS processed nearly 67 million refunds, with an average payment of $3,011, a 4.6% increase from the previous year. To expedite the process and receive your refund faster, file electronically, select direct deposit, and the IRS will process your refund in under 21 days.
How to File Your Taxes for Free
During this tax season, taxpayers have various options to file federal taxes for free. Most Americans qualify for IRS Free File, which offers free guided tax prep software from several partners with an adjusted gross income limit of $79,000. Each partner may have different eligibility requirements, so it’s essential to explore your options.
Additionally, taxpayers may qualify for IRS Direct File, a free tax filing pilot program from the IRS. This program is currently open to certain filers in specific states. So far, approximately 100,000 taxpayers have successfully filed returns with Direct File, with more updates expected in the coming months.
At Extreme Investor Network, we understand the importance of staying informed about personal finance topics like filing taxes. By educating ourselves and taking the necessary steps to comply with tax regulations, we can avoid penalties and make the most of any potential refunds owed to us.
