Before April 15, about 13 million Americans checked off the box for a six-month extension on filing their taxes. That grace period is coming to a swift end -- the late filing period closes on Oct. 15 – which could bring some unwelcome news to procrastinating taxpayers.
It’s not an issue affecting only a few stragglers: The IRS said that as of late September, one-quarter of the Americans who asked for an extension still haven’t sent in their returns. That means about 3.25 million households may be still sitting on their 2014 tax forms.
Missing Thursday’s deadline could deliver a financial punch in the form of a failure-to-file penalty, whose bite is far worse than those of failing to pay owed taxes. So for Americans who are juggling whether it’s better to blow the deadline or file and face the consequences of failing to pay the IRS, it’s important to realize that the second option is far better.
Here’s how the penalties play out: Failing to file by Oct. 15 will result in a 5 percent penalty per month of your unpaid tax liability.
On the other hand, if you file your returns by Oct. 15 but can’t pay what you owe, the fine is typically one-half of one percent of your unpaid liabilities – so a fraction of what you’ll owe if you skip the deadline.
The IRS, of course, wants Americans to pay up and will work with filers to create installment plans if they can’t pay their debt right away. Turbo Tax notes that the IRS will allow consumers to pay their tax obligations over a six-year period.
There are some exceptions to the Oct. 15 deadline, including for members of the military and others who are serving in combat zones. For everyone else, the IRS is recommending using the online e-file or Free File system to get in their returns before Thursday.