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by Wendy Connick
Not filing a tax return has some potentially dire consequences. For one thing, it’s technically considered tax fraud to not file a return when you’re required to do so. Unless you’re a famous actor, the IRS is not likely to bring charges against you just for failing to file. However, the agency can and will levy some fairly nasty penalties against you.
If you don’t file a tax return, the IRS will assess a failure-to-file penalty of 5% of the amount due for the year per month that you’re late, up to a maximum of 25% of your unpaid taxes for the year. You will also be hit with a failure-to-pay penalty, which is 0.5% of the amount due for the year, per month that you’re late to pay. This penalty is also capped at 25% of your unpaid taxes.
If you fail to file and to pay, you’re looking at a potential 50% penalty on top of what you owe on the initial tax bill. And to add insult to injury, the IRS also charges interest on late payments.
Claim the free extension
Since the failure-to-file penalty is 10 times greater than the failure-to-pay penalty, it makes a lot of sense to file your tax return even if you can’t afford to pay it at the moment. If you need more time to put your tax return together, you can get an automatic six-month extension by filing Form 4868. In order to fill out this form, you’ll need to roughly estimate your tax bill for the year. Don’t worry about getting this number completely accurate; just use what information you have to get a number that’s somewhere in the ballpark. When in doubt, aim high, rather than low. If you end up paying more than you owed, you’ll get a refund of any excess you paid at the time you filed your extension. (-Motley Fool)