With the tax deadline less than two months away, it’s easy to think, “I’ll handle it later.” But the longer you wait, the worse it gets. Not to mention that the recent IRS layoffs mid-tax season mean slower processing and longer wait times.
This is when it pays to have a pro in your corner who has direct line access to the IRS and knows how to do all the checks and balances to ensure a smooth and efficient filing experience. Get on our calendar before it fills up:
So you can get some support with those tax to-do’s now. Because I see things like this happen all the time in my office. People forget to file, or they put it off so long, they file late but end up facing a tax debt they weren’t expecting.
And both of those things have consequences…
TaxMaster Financial Service Corporation’s
“Real World” Personal Strategy Note
Avoid Tax Penalties By Filing On Time
“Success is not final, failure is not fatal: It is the courage to continue that counts.” – Winston Churchill
The tax code is so complex that it covers nearly 7K pages, and embedded within it are a whole host of requirements for us taxpayers. And, to incentivize rule-following, there are also 150+ different penalties for failing to comply. Logically that makes sense, but when you’re gut-punched with a tax bill surprise, those penalties can feel like a slap on top of it.
Now, while it is important to take IRS matters (and penalties) seriously, there’s one thing you must absolutely always do:
File your taxes.
Yes. Even if you can’t pay, file. Let me frame why I say this…
#1 – Failure to File Penalty (FTF)
The penalties for not filing are far worse than the penalties for not paying. If you owe taxes but file late, the IRS hits you with a penalty of 5 percent per month (or part of a month) on your unpaid balance, capped at 25 percent. Even being a day late counts as a full month.
Say you owe 1K in taxes. File your return six months late, and you’re looking at an additional 250 dollars just in IRS penalties. One month late? That’s a 50-dollar penalty.
If you’re more than 60 days late, the IRS raises the stakes: you’ll owe the lesser of 485 dollars (for 2024 returns) or 100 percent of the unpaid tax. This is why filing matters.
Now, let’s focus on the separate but related penalty for not paying your federal tax balance.
#2 – Failure to Pay Penalty (FTP)
This penalty starts at 0.5 percent of the balance due, charged monthly or each portion of a month.
BUT… if you managed to miss filing AND paying, the combination of the FTF and the FTP won’t exceed 5 percent per month. Basically, the FTF gets reduced to 4.5 percent, so the IRS can charge you the 0.5 percent FTP penalty while not exceeding 5 percent monthly for both penalties.
What you want to take away from that is: the monthly penalty rate won’t go over 5 percent. The IRS is so “generous,” huh?
They’ll also be generous with that percentage if you set up a payment plan (as that’s what they want). Your “reward” is the IRS dropping your FTP down to 0.25 percent.
BUT… things can go the other way as well. I’m talking about ignoring the IRS’s aggressive collection actions. When you ignore those and still don’t pay, your FTP increases to 1 percent moving forward. (Note: There is a 25 percent legal cap on the FTP.)
What happens if you file late and don’t pay?
#3 – Combined Maximum Penalty
As I mentioned before, the IRS stacks both penalties—but caps the total at 5 percent per month for the first five months. That’s a combination of the FTF (reduced to 4.5 percent) and the FTP penalty (0.5 percent). That’s 2.5 percent savings on the FTF if you owe both.
Over time, the combined IRS penalties max out at 47.5 percent of your original tax bill.
Let’s circle back to that 1K example: Wait long enough to file and pay, and you’ll owe 1,475 dollars—and that’s before interest even joins the party.
#4 – Interest
I’m convinced this one is the inspiration for the “kick you while you’re down” cliche. Because, not only will you get charged interest on unpaid tax debt, but you’ll also be charged interest on the penalties. How much? The going rate is 8 percent annually and it compounds DAILY. The longer you wait to pay, the more you’ll actually pay.
Procrastination feels easier in the moment—but it’ll cost you much more later on (up to 40 percent more). The IRS takes deadlines seriously, and so should you.
I bring this up to help put emphasis on filing on time. In February, things were quiet because a lot of people wait until closer to April 15 to get things in gear. Filing now can save you hundreds of dollars on IRS penalties and a lot of stress later, and ensure you avoid filing late. If not, you can at least go on extension and avoid the “Failure to File” penalty.
We can help simplify the process for you, and answer your questions, and provide our expertise, along with ID theft protection and audit protection. Let’s get your taxes filed before that deadline sneaks up on you. Your future self (and your bank account) will thank you:
212-247-9090
