First offenders can avoid the penalties for not filing
When it appears you're going to have trouble meeting the annual tax deadline — which was moved from April 15 to July 15 for 2020 — you're supposed to file for an extension to get more time to submit your return. But you're also expected to estimate what you probably owe in taxes and pay that amount.
In other words, an extension gives you more time to dig in with your tax software and file your return — but not more time to pay.
When you don't file on time and fail to pay taxes that are due, the IRS charges a penalty of 5% of the unpaid taxes for each month you're late, up to a maximum 25%. After five months, a 0.5% monthly penalty kicks in. You'll also be charged interest on the unpaid taxes.
But stuff happens, and maybe all of the coronavirus drama caused you to forget about this tax season's odd deadline. If you've had a history of filing on time, you can get relief from the extra charges.
"A taxpayer will usually qualify if they have filed and paid timely for the past three years and meet other requirements," the IRS said Monday, in a news release.
You'll receive a notice from the IRS about your failure to file on time, and it will include a toll-free phone number that you can call to ask for relief from the penalties and interest. The tax agency says it's probably best to make your request once you've paid off your overdue taxes.
One huge benefit of penalty-free late filing is that you get more time to raise the money needed to pay your taxes — and won't feel so tempted to put your tax bill on a credit card, which could drive up your credit card debt and potentially hurt your credit score.
Others who get more time with no penalties
Some taxpayers automatically qualify for extra time to file and pay their taxes.
They include members of the U.S. military and support personnel serving in combat zones. They're given at least an additional 180 days to get the IRS what it wants.
Some disaster victims also receive more time without having to worry about penalties or interest.
Same goes for people who get refunds. In fact, if you're the one who's owed money — not the IRS — you can take up to three years to file for your refund, and there's no penalty for submitting your return late.
But why would you wait? It's your money, and the faster you get it into your hands, the faster you can put it to good use: saving it or investing it, or maybe putting it toward the down payment to buy a home at one of today's insanely low mortgage rates.
As of July 10, the IRS says it processed 96.8 million tax refunds, averaging $2,762.
And here's a new one: If you got your return in by the July 15 deadline and haven't received your refund yet, you'll get it — plus interest. The IRS is paying 3% interest, compounded daily, on historically late refunds paid from now through Sept. 30.