The deadline to file taxes this year is April 18, and even though 70% of Americans are expected to receive a refund according to the IRS, many will still miss the cutoff date.
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Last year 111 million refunds were issued, with an average payout of $2,860. For those who are going to miss the deadline – don’t panic – but be prepared to act quickly.
Here is what you need to know if you are not prepared to file and pay your taxes by Tuesday.
File an Extension:
The best thing you can do if you know you are going to miss the deadline? File for an extension.
"File Form 4868 to extend the time for filing return. The extension could be effective for filing as late as October 16,” Ted Kurlowicz, professor of taxation at The American College of Financial Services, told FOX Business.
There are a variety of reasons people might need to file an extension, whether they don’t have all their sources of income and expenses identified or they need assistance, Tim Speiss, partner at EisnerAmper Wealth Planning LLC, told FOX Business. However, filing for an extension does not mean you also extend the timeline to pay your taxes.
"To have a valid extension generally—you need to pay in 90% of the tax due at the time of the filing, so in that case by April 18. If you can’t do that, pay in as much as you possibly can to avoid further potential late-filing and interest charges,” Speiss said.
So filing a 4868 form with payment, which can be done online, will keep you in the IRS’ good graces for the time being.
File and Pay as Soon as Possible
Generally people who miss the deadline either ran out of time or didn’t have the money, Kurlowicz said.
“You should do the least harm and file as soon as possible and pay the tax as soon as possible,” he said.
If you file and pay late you are most likely going to have to pay a price. A penalty is issued first for filing late. This is 5% of the amount of unpaid taxes each month, up to a maximum of 25%. The penalty for paying late is 0.5% of the amount you owe each month up to a maximum of 25%. If both penalties are due in the same month, the failure to file penalty is reduced to 0.5%.
"The late filing penalty could actually be higher than the late tax payment penalty so you should file as soon as possible to do the least harm your personal finances,” Kurlowicz said.
The IRS will not forget about your dues, so make sure you address them promptly.
"If a person is late with filing and late paying taxes, if they're diligent and proactive with the tax authorities, that’s the best way to position yourself for best possible outcome,” Speiss said.
If you have suffered a recent hardship, the IRS also may be receptive to your circumstances.
"You could negotiate penalties and interest, not usually the tax, but with a hardship you might be able to negotiate a tax settlement,” Speiss said.
There is a valid excuse for filing and paying late: being outside the country. In that case the deadline will be extended until June 15, Kurlowicz pointed out.
Ask for Help
If you are unsure of what to do or how to handle your financial situation, consult or request help from a qualified professional.
“It’s a very stressful experience for many people,” Speiss said. "If you’re in a situation where you don’t think you can meet the filing deadline requirement … it’s always best to go out and hire competent tax advisors to assist you."