5 Reasons to File Your Taxes On Time

When the federal government first established a tax deadline in 1913, only 0.4 percent of the population submitted their returns! Nowadays, about half of Americans pay income tax — and over 20 million of them wait until after the tax filing deadline.

This year, the deadline to file your 2022 tax return is April 18, 202s. If you’re thinking about procrastinating, think again. Filing on time is the best way to save money and stay out of trouble.

5 Things That Happen When You Miss the Tax Filing Deadline

1. You face tax penalties. The IRS takes the tax filing deadline seriously, and they’ll charge you penalties if you don’t file your return (or an extension) on time. They also charge you interest and penalties if you don’t pay your taxes by April 18, even if you file an extension.

Filing for an extension gives you a new deadline for submitting your tax paperwork, but not a new deadline for paying your taxes.

Did you know? The penalty for not filing a return (4.5 percent) is nearly TEN TIMES more expensive than not paying your taxes (0.5 percent)! If you cannot pay all the taxes you owe by the tax filing deadline deadline, it is better to file your return on time and pay what you can.

2. You’ll miss out on a potential refund. Most tax filers get a refund on their taxes. Chances are you will, too — but only if you file your tax return. And if your tax return is three years late (or more), you’re disqualified from receiving any refund at all.

Did you know? Last year, only 61 percent of late returns got a refund (versus 70 percent of early filers).

3. You could face a tax lien or levy. If you fail to pay your taxes even after receiving notice from the IRS that you have an outstanding balance, the IRS can place a tax lien or levy against your property. This means that they have the right to any proceeds — like if you sell your home or car — from your property. The IRS can even seize and sell your property themselves, or require your employer to pay your wages directly to the government. Yikes!

Did you know? Once a lien is filed, it immediately affects your credit score, making it more difficult to get a credit card, sign a lease, and more.

4. You miss out on retirement and disability benefits. If you’re self-employed and you do not file your return, your income is not reported to the Social Security Administration. This means you will not pay self-employment tax or receive credits toward your Social Security retirement or disability benefits, which could result in lower (or nonexistent) Social Security payments when you need them.

Did you know? Don’t be discouraged by the self-employment tax! You only have to pay this tax on your profits, and the cost is typically offset by other business deductions.

5. You put off the inevitable. Just because you delay paying your taxes doesn’t mean they’ll go away. The IRS receives copies of your W-2 and 1099 forms, so they’ll know if you’re skipping out on filing. Meeting the tax filing deadline is an important financial and legal responsibility, and it should be one of your top priorities this spring.

Did you know? Filing an extension does not make you more likely to get audited, but mistakes on your return do. If finishing your tax return on time requires a last-minute frenzy, consider at least filing a six-month extension by the deadline; this will give you more time to submit an accurate return and keep you on the IRS’s good side.

What If You’ve Already Missed the Deadline?  

If you didn’t file your tax return on time, you’re not entirely out of luck. Late payment and late filing penalties accrue over time, so file as soon as you can. If you’re a day or even a week late, you may only owe a very low penalty.

If you’re behind on your taxes by a year or more, you can still get back in good standing with the IRS by filing all your returns this year. Don’t forget: You’ll forfeit potential refunds if you’re over three years late. Late-filing penalties will max out at 25 percent of your owed tax, but you can typically submit reasonable cause arguments to ask the IRS not to charge you penalties. If you do owe money and can’t pay all at once, you can set up a payment agreement with the IRS.