The April 18 deadline for taxpayers in the United States is quickly approaching, and many penalties can await taxpayers who fail to file on time.
The deadline also serves as the deadline to ask for an extension to file one's taxes, though those granted an extension will still need to pay by April 18, as the extension only applies to filing taxes, not paying them. While some may choose to forgo paying/filing taxes, failing to do so can rack up multiple fines and penalties, which could be up to 47.5% of one's original tax bill, plus interest, according to the Wall Street Journal.
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With that in mind, here are the penalties taxpayers can face if they do not file and pay taxes by April 18:
Failure to file penalty
The failure to file penalty is given to taxpayers who owe the government money and is 5% of their unpaid taxes for every whole or partial month their return is late. A taxpayer who owes $1,000 would be fined $50 every month they are late to file their return, and tax returns that are over 60 days late are given a minimum penalty, which is either $450 or 100% of the tax owed from 2022, whichever is less.
Failure to pay penalty
A taxpayer who files on time but fails to pay the taxes they owe is issued a failure to pay penalty, which is 0.5% of their unpaid taxes for every whole or partial month they do not pay their 2022 taxes. This penalty limits itself to 25% of the taxes owed for the year one is filing for, meaning a person who owes $1,000 in taxes would be fined $5 every month, which would cap out at $250.
Failure to file and pay
For taxpayers who are unable or choose not to file and pay their 2022 taxes, the penalty is not as severe as one might expect. For those whose taxes they owe is $1,000 and fail to file and pay this $1,000 by April 18, their failure to file penalty is 4.5%, while their failure to pay penalty is 0.5%, equaling a monthly penalty of $50. The failure to file penalty will max out after five months, but the failure to pay penalty will continue until it reaches 25% of their tax bill.
Interest
Interest on unpaid taxes will begin to accrue from the original due date until the taxes are paid in full, with the most recent interest rate at 7%.
Steps one can take ahead of the looming deadline
If a taxpayer has any extra cash on their hands, they can check around for possible tax breaks they can take advantage of. Contributing to a traditional individual retirement account ahead of April 18 can help decrease the amount of taxes one owes.
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A taxpayer who does not have cash to spare can opt to take the standard deduction, which is a fixed amount any taxpayer can take to reduce their taxes.
Alternatively, a taxpayer can check tax credits and see if they are eligible for any of them, such as the Child Tax Credit and the Earned Income Tax Credit. The former credit is a tax benefit for families with a qualifying dependent child, while the latter is a credit that helps low- to moderate-income workers, according to the Internal Revenue Service.