Tuesday, April 17, 2018, was the tax deadline for most taxpayers to file their tax returns. If you haven’t filed a 2017 tax return yet, it’s not too late, and it may be easier than you think. First, gather any information related to income and deductions for the tax years for which a return is required to be filed, then call the office.

If you’re owed money, then the sooner you file, the sooner you’ll get your refund. If you owe taxes, you should file and pay as soon as you can, which will stop the interest and penalties that you will owe.

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TaxConnections Picture - Time and Money“L” is for Late Fees, which can be substantial.  There are late fees for everything when dealing with tax returns.  It’s not fun to be late with your return or late with your payment; the sooner you can get current, the better off you will be.

One of the somewhat hidden late fees is for a late filed Partnership or S Corporation return.  The IRS charges a penalty of $195 per shareholder per month for a late filed 1065 or 1120S return.  So if you have 5 partners and you fail to file an extension and then filed the return in September that would be 6 months late x 5 partners x $195 which equals $5,850.  Yikes!  I would not suggest filing a 1065 or 1120S late as you can see the penalties add up in a hurry.

There are also fees for filing your tax return late or even if you filed for an extension if you have a balance due on your extended return there are penalties for paying late.  An extension is only an extension of time to file your return, not an extension of the time to pay the tax.  If you file on time but don’t pay on time the penalty is ½ of 1% of the tax owed for each month.  If you owe tax and you don’t file your return on time it gets worse and the penalty is 5% of the tax owed for each month.

Anytime there is a penalty for paying something late, there is also going to be interest charged.  The IRS charges interest based on the current interest rates so the IRS rate changes every month.  Since interest rates are low right now the IRS is usually charging 2% to 3% which isn’t too bad, but it can still add up.  To be fair, the IRS also pays you interest when you file amended returns to claim refunds from prior years.

Taxes A to Z – still randomly meandering through tax topics, but at least for 26 posts in an alphabetical order.