Individual Income-tax Filing Season 2014 Ends on April 15 – Know the Penalties for Being Late

Tax Professionals Resource
March 24, 2014 — 2,099 views  
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The American income-tax filing season 2014 gets over on April 15 for citizens who must file their individual income tax returns. If you haven't already filed your returns, it's time to gear up. That is, unless, you plan to seek the six-months extension from the feds.

 If history is any indication, there exist several American tax payers who do not understand the binding nature of the deadline. A question that often pops up at this time of the year,  is that is April 15 a non-extendable deadline! If you happen to be one of the lot, struggling with the same question – here's the answer. Yes, it is.

April 15 is a non-extendable deadline. Fail to file your tax returns or officially procure the six-months additional time and the Internal Revenue Service is going to penalize you big time.

Deliquescent filing of returns

According to the Section 6651(a)(1), you are liable to be penalized with an amount worth 5 percent of your total tax liability for the year, for each month that you are late.

Say you are 6 weeks late, that is, a month and a half. The feds will however round it up to two months and you will have to end up paying 10 percent of your net tax liability for the year. While the total penalty is capped at 25 percent – that is no consolation. Why file your returns late and pay extra from your pocket?

File before April 15 or procure the aforementioned extension.

Deliquescent payment of returns

You must not only file your returns, but also pay the net tax liability by April 15. Late payment will subject you to an additional penalty – additional 0.5 percent/month added to your next tax liability, as provisioned for in Section 6651(a)(2).

The maximum liability is again up to 25 percent. However, the important thing to note here is that April 15 is the final deadline for payment. Unlike the filing deadline, where you can seek a six-month extension, you must pay your net tax liability by April 15.

What happens when 6651(a) 1 & 2 apply together?

If both sections apply to you for a month, you will have to pay a penalty amount that is 5 percent minus 0.5 percent. That is, you will be penalized with an amount worth the difference of the penalties provisioned for in section 6651(a)(1) and section 6651(a)(2).

Is there a way out?

The IRS ambiguously mentions the presence of a “reasonable cause” for late filing and no payment as the only way out of a penalty. Examples of such “reasonable causes” include the taxpayer or anyone in his/her immediate family suffering from serious illness or dying. If you can prove your commercial property or business documents were destroyed by fire, or you got misled by erroneous advice from IRS, or, the presence of an unavoidable reason that caused your absence at the time of the filing, you can escape the penalty.

Tax Professionals Resource