Tick-tock. Time is almost up on that six-month extension you filed back in April to give yourself more time to complete your 2011 individual income tax return.
What happens if you fail to file your return by October 15, the extended due date? One consequence: Unless a disaster-relief exception applies or you have a valid reason, you may be charged penalties and interest.
For example, the penalty for filing your return after October 15, 2012, is 5% of the amount of your unpaid tax, per month, up to a maximum of 25%. After 60 days, a minimum penalty of $135 or 100% of the tax due applies.
In addition, a late payment penalty of ½ of 1% of the tax due may apply for each month or part of a month that you fail to pay the tax due. The two penalties interact and can be combined.
You’ll also have to pay interest on the tax due. During 2012, the rate on underpayment of tax has been 3%. The interest is compounded daily and can be charged on penalties.
Since the penalty and interest are based on unpaid tax, neither applies when your return shows a zero balance. Filing a return is still a good idea, however. Why? The general rule limiting the IRS to a three-year period for assessing tax begins when you file. No return, no statute of limitations for being audited.
Give us a call if you have questions or need filing assistance.