The True Cost of Tax Procrastination

Millions of American taxpayers request the Internal Revenue Service for extra time to file their individual income tax returns every year. A variety of factors might have led to tax procrastination, such as shifting due dates, changing tax laws, causing IRS backlogs, and the underestimated reason: taxpayer burnout, which will cost you dearly.

Traditionally, Tax Day falls on April 15, marking the deadline for individual federal income tax returns and any payments due. However, exceptions to this rule have occurred, such as when the IRS extended the deadline to mid-year in specific recent tax seasons. These adjustments have led some taxpayers to expect more time to file and pay, affecting their readiness when traditional deadlines are reinstated.

But the bigger problem: 56% of Americans don’t even know when the deadline is!

SO, HOW COSTLY ARE THE PENALTIES?

Upon missing deadlines and failing to file your taxes by the deadline, the IRS will be charging you interest on the unpaid balance, alongside a late payment penalty that would range from 5% to 25% interest on the amount you owe each month it went due.

Failing to file a penalty is 5%, and not paying the penalty is 0.5% of the unpaid monthly taxes, up to a maximum of 25%.

WHAT ARE THE OTHER CONSEQUENCES OF TAX PROCRASTINATION?

Your Tax Returns Might Be Delayed

If you are looking to receive a faster tax refund, you really shouldn’t procrastinate filing ITR. Most people who file tax returns get refunds, and it generally takes the ITR about three weeks to process refunds. While this is the case when you file electronically, paper returns can take twice that turnaround time or longer.

You Might Lose Out On Interest If You Are Owed A Refund

With tax procrastination, you might risk losing the money the government owes you, and when taxpayers fail to file their tax returns within three years of the return due date, you end up forfeiting any cash the IRS owes you. The earlier you invest your refund or use it for a high-interest-earnings savings option, the more interest you will receive on it over time.

Rushing Can Cause Mistakes. You Might Need An Audit

You rush when you fail to file your ITR within the deadline. When you don’t have ample time for tax preparation, there could be a lot of mishaps, and you might need an audit. Not only is an audit going to cost you money, but you also need the resources and time.

 

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You Might Miss Out On Favorable Billing Rates

Your tax preparers might give you favorable billing rates if you are an early bird. Tax procrastination will not only cost you a penalty, but you might also miss out on tax preparation cost savings.

No Extra Time To Plan The Taxes You Owe

This is a great reason to file the ITR early, as it will give you extra time to pay the taxes you owe. Filing early will also give you time to arrange your payment, and you don’t want to miss out on that.

Your Refunds Might Be Prone To Identity Theft

Many people who file late have become victims of tax refund fraud. Between 2015 and 2019, the IRS prevented fraudsters from stealing $26 billion via identity theft refund fraud. But billions still ended up in the hands of these thieves. Filing early might not completely prevent identity theft, but it can protect your refund. Fraudsters might file a return using your social security number before you do, and the IRS will kick out your return since their records will show that you have already been refunded. In such cases, it might take months to clear up the mess with the IRS and finally get your refund.

BOTTOM LINE

Most experts agree and recommend that it is best to start your return at the earliest. The decision to file early might depend on your return’s complexity, especially if you receive a refund. It is best to follow the advice of a tax advisor to ensure that your return is accurate and complete. And to delegate your tax preparation to an offshore tax preparer who would do the same and ensure that you don’t miss the deadline.

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