Filing your taxes on time is important because it helps the government regulate the economy. It also provides health, education, public services, and security opportunities. The government considers late filing a breach of social responsibility and is unlikely to forgive it. Therefore, you should file your tax returns on time to avoid any penalties. Generally, the IRS begins accepting returns on January 23. Still, some taxpayers won’t be able to file until they get the necessary tax documents. For example, 1099 forms from investment accounts might not arrive until mid-February or March. In these cases, it’s still a good idea to file early to give yourself plenty of time to review your return before the deadline. Here are the most important benefits of filing taxes on time:
- Filing your taxes by the deadline helps you avoid late filing penalties imposed by tax authorities. These penalties can be significant and can accumulate over time if you continuously delay filing your taxes.
- Filing your taxes on time is especially important if you’re eligible for a tax refund. By submitting your return promptly, you’ll receive any refund owed to you sooner, providing you with financial relief or the ability to invest or use the funds for your needs.
- Filing taxes on time provides a clear picture of your financial situation, enabling you to better plan and budget for the future. Timely filing allows you to assess your tax liability or refund and make informed decisions about your finances.
- Procrastinating on your tax filing can lead to unnecessary stress and a last-minute rush. By filing your taxes on time, you eliminate the pressure associated with meeting the deadline, ensuring a smoother and less stressful experience.
- If you owe taxes and fail to file on time, you may be subject to interest charges on the unpaid balance. By filing promptly, you can minimize or avoid these interest charges, saving you money in the long run.
- Filing taxes on time demonstrates your compliance with tax laws and fulfills your legal obligations as a taxpayer. It helps you maintain a good standing with tax authorities and promotes a positive relationship with them.
Late Payment Penalties
You’ll face hefty penalties if you don’t file your taxes by the deadline. According to the IRS website, if you owe money, the failure to file penalty is 5% of your unpaid taxes for each month or part of a month you’re late. The penalty maxes out at 25% of your unpaid taxes.
If you’re filing for a refund, the failure to pay the penalty is 0.5% of the amount you owe plus interest. The IRS will also charge you monthly interest on all outstanding balances, including penalties and tax. This monthly interest rate is equal to the federal short-term rate plus 3%.
You Could Lose Some Tax Benefits
In addition to the penalties, not filing your taxes on time could leave you out of some valuable benefits. For example, if you have children or are self-employed, it’s likely that you can claim credits like the earned income credit and child tax credit. These credits can reduce your tax liability significantly, so it’s important to file your return by the deadline.
One of the biggest reasons people procrastinate is because they think it will take longer than it really does. In fact, most returns can be completed quickly with the help of software. And by filing early, you can avoid stress and anxiety around the April 18 deadline.
If you’re unsure about your ability to file by the deadline, you can request an extension from the IRS. They’re more interested in getting what they’re owed than penalizing taxpayers, so they’ll work with you to create a payment plan
