Personal Finance

Deadlines and penalties (concerning taxes)

Almost all governments across the globe are funded – in some form – by the taxation of its citizens. Certain of the taxes are collected at the time of sales or service whereas certain others in a 12 month period or at the end of what they call a fiscal year.

In United States, 15th April is considered as the deadlines for various tax filings. That is April 15 is the deadline for every citizen to file his/her income taxes (or file an extension); pay his/her income taxes for the previous year; pay his/her current year first quarter estimated tax; file partnership (1065) and trust (1041) tax returns, or to request an extension (Form 8736 for partnerships, Form 2758 for trusts).

One can also ask the IRS, in technical terms “file an extension” to provide more time to file your tax return. The deadline to file one’s return is April 15th. The IRS will extend your deadline by four months. This will provide you an extra four month time to file your tax return. That is now your deadline to file a tax return is August 15th. Remember, an addition of time to file is not an extension of time to pay.

The deadline of tax return can be extended by filing an extension. But keep in mind if you owe the IRS, you are responsible to pay your complete tax by 15th April every year. For those who haven’t paid their complete tax, the IRS will compute certain amount of penalties and interest on the person’s outstanding balance. Generally, the penalty amount is calculated 5% per month. The IRS will calculate up to a maximum penalty of 25% of the balance due. Also, if any person fails to pay penalty he/she has to pay 0.5% each month, with an additional monthly interest charge.

Nowadays filing an extension and paying your taxes are very easy. You can pay off your tax using your credit card and at the same time file your Form 4868. IRS has approved two credit card services – Link2Gov and Official Payments. Link2Gov provides extension payments through Pay1040. Both of these companies charge a 2.49% convenience fee for providing this service. One can also file his/her extension with the help of tax preparation software – TaxAct, TurboTax, and TaxCut provide necessary instructions about how to file an extension.

Hence it is advisable to file your tax returns on time. You are responsible to pay your tax to the government. After all, it is the duty of all the citizens.