Tax season has come and gone, but that doesn’t mean everyone’s completed their federal filings. For many, the filing of accurate returns continues to be a struggle after April 15. Some are still working to collect the necessary information. In those cases, filing an appropriate extension request with the IRS protects you from a 5 percent penalty for not filing a timely return. It’s important to note that an extension doesn’t remove the obligation to pay taxes – even with an extension, interest and penalties will still be charged on outstanding balances.
What many people don’t realize is that the April 15 filing deadline is a moot point for anyone who doesn’t owe any taxes. Because the late filing penalty is charged as 5 percent of the amount due, it means there is a zero dollar penalty for those who would have received a refund or owed no taxes.
According to the IRS, there is no real reason to enforce a late filing penalty on taxpayers who don’t owe. The IRS doesn’t gain anything by forcing the hand of those taxpayers. In fact, unfiled returns benefit the IRS if taxpayers are owed a refund. After three years, you forfeit your return amount; in 2013, the IRS was sitting on $760 million in refunds potentially owed to 918,600 taxpayers for 2010.
Individuals with a certain low income status are not required to file returns at all, though many file to receive their refunds. The IRS said that individuals who are owed a refund generally file early in the year because they want to receive their funds as soon as possible.
Whether or not you owe the IRS money or the government owes you, accurate and timely filing of all federal, state, and local tax forms protects yourself and your business. Even when the tax amount owed is small, failing to file appropriately results in large fines that can cause havoc with personal or business finances.
Source: Dallas News, “April 15 not much of a deadline for most taxpayers” Stephen Ohlemacher, Apr. 15, 2014