Getting the late filing penalty might not be the end of the world. However, there is always a right way and a wrong way to file taxes. Therefore, it is imperative for you to know about some of the common late tax filing mistakes you should avoid at all costs.
When you make mistakes on your tax returns, it could cost you both time and money. You might end up missing out on a significant refund than your overall claims, owing up more taxes (along with interests and a late filing penalty), or even inviting an in-depth audit from the IRS or Internal Revenue Service. The best solution to such issues is avoiding common errors on your overall returns.
Common Tax Filing Mistakes Leading to a Late Filing Penalty
Tax laws can be complex. Even though the rules might be complicated, the mistakes committed by taxpayers on the respective returns can be quite straightforward. Some of the common tax filing mistakes to avoid a late filing penalty are:
# Assuming Tax is All That You Owe
When you pay later, you end up paying more. It is because you will owe interest on any amount that is outstanding after the deadline of tax filing -even after getting an extension.
The IRS might also end up assessing the late filing penalty -usually 0.5 percent every month of the outstanding tax that is not paid by the deadline of tax filing. The maximum penalty can be around 25 percent. You can have some freedom if you have paid at least 90 percent of the total tax by the stipulated deadline while paying the rest upon the return.
# Believing You can Ask for an Extension
In some circumstances, the IRS can grant you an extension even when you do not ask for it. When you are not aware of the exact rules, it could cost you time and money.
If you are a resident of the United States of America or a resident who might have lived & worked outside the country on the deadline of tax filing, you can get an extension for filing and paying without even requesting for the extension.
At the same time, people who are affected by some form of natural disaster will instantly get access to more time to file as well as pay the taxes.
# Not Paying Attention to the Extension Deadline
Missing out on the extension deadline might incur you the penalty of 5 percent for late tax-filing. If you end up blowing the deadline and the tax return is more than 60 days late, you will have to pay either $435 or what you owe currently -whichever might be smaller.
Conclusion
Always make sure that you sign the tax return. It might not be valid unless you have jointly signed with your spouse. Moreover, the past tax returns will be helpful when you are filing the ongoing tax returns or filing the amended returns.
Also Read - HOW CAN HOME OFFICE DEDUCTIONS BE AN ABSOLUTE GAME CHANGER WHILE FILING INCOME TAX RETURNS
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