Q: What if I don't file a tax return by today's deadline?
Q: What if I don’t file a tax return by today’s deadline?
A: Taxpayers who don’t file by midnight face penalties of 5 percent a month on unpaid taxes, up to a maximum of 25 percent. For taxpayers with small outstanding tax bills, there is a minimum penalty of $135, or 100 percent of the unpaid taxes, whichever is smaller.
Plus, you still have to pay the taxes. That’s not all: You also will owe interest on the unpaid amount. If you file a return but cannot pay all you owe, the penalty is 0.5 percent of the unpaid taxes a month, but you’ll still have to pay interest.
Q: What if I can’t afford to pay my tax bill?
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A: Consider asking the IRS for a short-term extension or an installment agreement. Taxpayers generally are eligible for such agreements if their bill is less than $25,000 and they have paid their taxes on time in the past. Taxpayers with such agreements still must pay penalties on the unpaid balance, but they are reduced to 0.25 percent a month.
Taxpayers can use credit cards to pay tax bills.
Q: If I file for an extension on my return, do I have to pay any taxes owed by April 15?
A: Yes, if you want to avoid penalties and interest.
Q: Are there tax advantages to filing for an extension?
A: The extension gives taxpayers more time to complete their returns. However, it will also allow people to make 2008 IRA contributions much later in the year — as late as Oct. 15, 2009.
Also, this year, first-time homebuyers who plan to purchase a home before Dec. 1 might consider filing for an extension because they will be able to take a generous credit on their 2008 taxes.