Every year, taxpayers have a deadline of mid-April for filing and paying their taxes. While some people will apply for extensions that give them until October, many others will file and pay much earlier in the year, some before January is even over with.
As much as you might want to procrastinate with regard to filing and paying your taxes, there are a number of benefits associated with early tax filing in Jamestown, ND. You can avoid penalties and interest being added to the payments you owe, avoid losing potential refunds to having to pay back taxes and also protect your credit.
Here are just a few facts you should know about paying your taxes and getting it done in a timely manner:
- Beware of penalties: You can be fined both for filing late and for paying late, and these fines can quickly add up. If you file your tax return more than 60 days late, you can expect to pay at least a couple hundred dollars in fines or 100 percent of your unpaid tax (if the amount owed is less than $210). If you are due a refund, there is no penalty for filing late. However, if you pay late, you will be penalized a half percent of the unpaid tax per month. The longer you avoid paying, the greater the fine will be, and if both the late filing and late payment penalties apply, you could be fined up to five percent per month of the unpaid tax.
- Extensions: If, for whatever reason, you’re unable to file on time, you should request an extension. You are still encouraged to pay as soon as possible, as the extension is only for filing your tax paperwork and not for paying your debt. You may need to take out a loan to be able to pay in full—this might be less expensive than the penalties you’d get from going into debt with the IRS.
- Multiple payment options: There are various payment options listed on the IRS website. IRS Direct Pay is a great way for you to quickly and easily pay part or all of what you owe, as it is a free transfer from a checking or savings account. If you cannot pay immediately, the IRS will work with you to develop a payment plan, which can be spread out over up to 72 months.
- Reasonable cause: There are some circumstances in which the IRS may not levy a late payment penalty against you if you are able to demonstrate reasonable cause for being unable to file or pay on time. What constitutes “reasonable cause” varies from case to case—a tax prep professional will be able to provide you with more information about this.
In general, it is in your best interest to file early and pay off what you owe. Plus, if you file early and don’t owe anything, you can get your tax return back earlier in the year and use it as you wish. For more information, or to arrange for help with filing taxes in Jamestown, ND, reach out to Craig S. Hanson, CPA today.