This year’s tax deadline has come and gone, and hopefully you’ve filed your taxes by now; or at least filed for an extension. If you’ve avoided filing this year out of an inability to pay, however, it’s worth knowing that not filing your tax return will cost you much more in the long run than failing to pay in full. Both failing to file and failing to pay will result in penalties, but you can significantly reduce your penalties by filing and then working with the IRS to come up with a solution for whatever balance you might owe.
The difference between the two penalties is stark:
- Failure to file will trigger a penalty of 5 percent of your owed taxes each month up to a maximum of 25 percent of what you owe.
- Failure to pay (in full) triggers a penalty of 1/2 of one percent of what you owe per month up to a maximum of 25 percent of the total owed taxes.