I forgot to file my tax return!
The deadline for filing your taxes was April 15th. If you forgot to file, you could owe penalties and interest to both the IRS and state. If you did not file an extension and owe, you will be subject to multiple penalties including both the failure to file penalty and failure to pay penalty. If you have reasonable cause, you may be able to have the penalties removed. However, you should prepare yourself for the consequences and file as soon as possible.
The failure to file penalty is 4.5% of the tax you owe, per month, up to five months. The failure to pay penalty is 0.5% of the amount you owe, per month, up to a maximum 25% penalty (fifty months). The maximum penalty you will owe is a maximum of 47.5%. You also owe a complete month’s penalty on the first day you are late.
On top of these penalties you will also owe interest on any amounts that you owe. The current federal interest rate is 3% for individuals.
However, if you live in Vermont you will owe penalties regardless. Vermont has a minimum $50 penalty if you file more than 60 days late, even if you do not owe taxes. Assuming you do owe taxes, you are subject to a 5% failure to file penalty and a 2% failure to pay penalty based on the amount you owe. Interest also accumulates at 0.5% per month or an annual rate of 5.6%.
Don’t get caught off-guard! If you have not filed your taxes you need to do so as soon as possible. Even if you cannot pay in full, it is usually less expensive to borrow the money than accumulate penalties and interest.
Alyssa McBride, Associate Accountant, Davis & Hodgdon Associates CPAs
Davis & Hodgdon has been assisting individuals and businesses in the Burlington Vermont Metro area for more than 20 years. The firm provides tax planning for individuals, corporations, trusts and estates that are seeking effective strategies to keep more of what they’ve earned. We also prepare all types of tax returns, including individuals, businesses, gifts and estates, trusts, nonprofits and foundations. For more information please call 802.878.1963 or email [email protected].