Grrrrrrrr.......
Call it the miracle of compound interest. Or the government’s interest in collecting taxes. However you cut it, your household or business can easily rack up hundreds or thousands of dollars in late fees even if you are just a few months tardy. Here is the least you should know:
- Interest and penalties are assessed at both the federal and state level.
- For personal taxes if you do not owe then there is no assessment.
- Have a couple of partners in your business? Just a couple months late could run you close to $1,000 even if it is a LLC or type of corporation that pays no tax directly. Diss it for a year or more and it’s a nightmare.
Then there is the funny (not really) issue of what constitutes “late”. If you owe taxes and you filed an “extension” you are still going to get hit — and hit hard if you owe a lot. As it says in scripture — “it is an extension to file, not to pay”. That’s why professionals tell their clients to estimate and pay their liability by April 15 even if their information is not yet organized for filing.
The good news? Okay I won’t call it good — but penalties can be appealed (interest is statutory) and my experience is that usually the people on the other end are reasonable. But the process takes time — the time on the phone, the time to resolve it, and money — especially on personal returns you are generally expected to “pay now, appeal later”. And if you have to hire a professional….well, you get the picture.