The tax deadline tends to creep up quietly. In 2020, the IRS extended the tax deadline to July 15, giving taxpayers another three months to file and pay taxes. However, it’s back to the normal schedule this year. After all, it’s never too early to start thinking about taxes. Filing taxes late can cost you big, so make sure you keep up with the tax calendar.
When is the Tax Deadline?
The IRS extended the 2020 tax deadline to July 15, giving taxpayers three additional months to file taxes and pay their taxes. The extension covers 2019 tax returns and payments, plus the first and second quarter estimated tax payments for 2020.
Typically, the tax deadline falls on April 15, and the IRS will most likely return to that schedule in 2021. Estimated taxes are also back to normal, and the deadline for Q3 and Q4 payments in 2020 was unaffected by the IRS coronavirus extension. Third-quarter payments were due on September 15th, and the fourth-quarter deadline falls on January 15, 2021.
Filing Taxes Late
If you think you’re going to file taxes late, you still have options. You can avoid penalties if you take proper precautions. With everything that has been going on with the economy, it is understandable if you need more time to pay your tax bill. If you are unable to pay by the tax deadline, it is important to set up a payment plan with the IRS before the deadline to avoid failure to pay penalties.
Filing a tax extension postpones the deadline to submit your return, but you still have to pay your tax bill on time. An extension only pushes back the filing deadline, so you’re still responsible for covering your annual tax bill before the April 15 deadline. However, the IRS will give you some wiggle room if you apply for a payment plan prior to the deadline.
What Happens if I Miss the Tax Deadline?
If you miss the tax deadline there are several things that can happen. The IRS has different penalties for improper filings and missed payments, and you could get hit with both if you miss the deadline completely.
Annual Taxes and Income Taxes
The IRS accesses a monthly 5% penalty for filing taxes late. The penalty cannot exceed 25% of the taxes due. If you fail to pay your taxes by the deadline, you will incur a 0.5% penalty for each month your tax payments are late.
In addition to federal income taxes, each state has its own rules regarding tax deadlines and penalties. Each state sets its own tax rules, so you will face different penalties depending on where you live. For example:
- California assesses a 5% penalty on unpaid taxes, plus an additional 0.5% for each month or partial month taxes go unpaid. The maximum penalty is 25% of the unpaid taxes.
- New York charges a penalty of 5% of the taxes owed for each month or partial month the taxes are late.
- New Jersey charges 5% of the taxes due for each month or part of the month the taxes are late. In addition, New Jersey may also tack on a $100 penalty each month if the taxes are late.
- Illinois charges a 2% late penalty on the balance for taxes that are under 31 days late. Payments that are over 31 days late are subject to a 10% on the balance due.
If you conduct business in multiple states, you should know about the tax laws in each state. Working with a SALT accounting specialist can help you plan for your state and local taxes.
Quarterly Tax Payments
In 2020, the IRS extended the first and second quarter estimated tax deadline until July 15. However, the deadlines typically come earlier in the year. If you’re self-employed and owe more than $1,000 in taxes, you probably have to submit quarterly payments on your estimated taxes. Failure to pay could result in an 0.5% underpayment penalty each month you’re late.
Filing Taxes Late: Can Tax Extensions Buy Me More Time?
If you need more time to file your taxes, you can file an extension. An extension may be useful if you are waiting on important tax documents to file your taxes. Filing a tax extension can extend the due date to file your tax return to October 15. However, just because you file a tax extension does not mean you get an extension to pay your tax bill. Your tax bill is still due by the tax deadline. For your 2019 taxes, the tax deadline is July 15. The IRS will penalize you for missing the payment deadline, even if you file a tax extension.
If you need more time to pay, you can set a payment agreement with the IRS. You can choose from several types of plans, including short-term payment plans and installment agreements. If you can pay your tax bill within 120 days, a short-term plan is probably the best option. However, if you need more time you will need to set up an installment agreement.
Remember, you must request a payment plan BEFORE the tax deadline passes or you could still face late payment penalties.
Get Professional Tax Help Now
Don’t panic if you’re worried about filing taxes late. Our talented tax team can prepare your taxes quickly and accurately. We can also assist you with filing extensions and setting up payment agreements. Get started today with a one-on-one strategy with a Shared Economy Tax professional. You can also subscribe to our tax tips newsletter using the form below.