We frequently receive questions from clients about tax extensions. These questions might involve how to file an extension, or how late one can extend taxes in Jamestown, ND before penalties start applying.
Here’s an overview of everything you need to know about tax extensions so you can prepare accordingly in the future. Note that this information is for taxes in a “normal” year—some of the dates and extension allowances were changed in 2020 due to the COVID-19 pandemic:
- If owed a refund: If the IRS owes you a refund, you will not be penalized at all for filing late—the IRS will just hold onto your money until you finally submit your return. You have three years from the original deadline to file your taxes for that year—otherwise, you will forfeit your right to a refund.
- If you owe taxes and do not file by the deadline: In this case, you will be subject to a late filing penalty of five percent of the taxes owed, for each month you fail to file. This penalty goes up to 25 percent of the taxes owed.
- If you do not file within 60 days: If you fail to file within 60 days of the deadline, you’ll owe either a flat $205 fee or 100 percent of all unpaid taxes, whichever is less.
- If you file but don’t pay by the deadline: If you or your accountant in Jamestown, ND file your tax return but do not pay the tax bill by the deadline, you will owe a penalty for late payment, equal to 0.5 percent of the taxes owed for every month you failed to pay up past the deadline. The maximum here is 25 percent of taxes owed.
- If you don’t file or pay: If you neither file a return nor pay a bill, you will not be subject to double penalties. In this case, the 0.5 percent late payment fee will be waived.
- If you requested an extension: If you requested a filing or payment extension, you will not be subject to penalties so long as you file your tax return by the October due date, and pay your tax bill by the April deadline.
- Interest: You can expect to begin accumulating interest on unpaid taxes the very day after your bill was due. This interest will continue to build every day until you pay off the bill in full. The interest rate is currently five percent, and can change at any time.
- Penalty forgiveness: You may be able to qualify for penalty abatement for failure to file or pay. There are several requirements in this case:
- You must have filed any required returns or an extension for all previous years
- You must not have been required to file a return before, or did not receive a penalty in the previous three years
- You paid or established a payment plan for any taxes due, and are current on any existing payment plans
For more information about extensions on paying your taxes and penalties for late filing, contact Craig S. Hanson, CPA to speak with your local CPA in Jamestown, ND.