A common joke among tax accountants is that the answer to pretty much any question is "it depends," and this applies here as well:
First, it depends whether you are late filing your tax return or if you are late paying your taxes.
- If you are late filing your tax return, you might be subject to late-filing penalties. This year, individuals must file their returns by April 18, 2017. If they cannot file their return by that time, they need to file the six-month extension. If the return is not filed by the required due date and the taxpayer cannot provide a good rationale, the IRS charges a late-filing penalty of 5 percent of the balance due for each month the return is delinquent.
- If you are late paying your taxes the federal government will charge you interest on the amount you owe. The tax is due on the original filing day (April 18, 2017 this year) even if the return will be submitted later. In other words, the extension to file is not an extension to pay. If you don't pay, the amount you owe will be charged interest by the federal government.
Second, it depends whether you already made enough tax payments to the Internal Revenue Service throughout the year (either through withholding form your paycheck or as estimated tax payment). If you made sufficient payments throughout the year, you will not be subject to penalties. Generally, the tax authority is not concerned with taxpayers who overpaid their taxes. Neither underpayment interest nor late-filing penalty apply because both are based on tax owed on the return due date.
Sonja Pippin is an Associate Professor in the Department of Accounting and Information Systems at the University of ÁùºÏ±¦µä Reno. She teaches tax and financial accounting classes at the undergraduate, graduate and MBA level. Her research includes the evaluation of different tax systems, the (unintended) impact of new tax legislation on different types of taxpayers as well as their effect on stock market and the economy in general.
