First, the bad news: If you haven’t filed your 2020 federal tax return yet, it’s officially late. But the good news is that depending on your tax situation, you might not have to pay any penalties. And if you do, the sooner you file, the lesser the pain will be.
If you have a tax refund coming your way, there is no penalty for filing your return late, the IRS noted in a tax tip issued Tuesday. But if you end up owing the IRS money, that’s a different story: Late filers are charged 5% of the money they owe for every month after the due date, up to a maximum of five months, and with a minimum fee that kicks in once you are 60 days late.
The late filing fee differs from the late payment fee, which zaps taxpayers who have filed but not paid all of what they owe. The late payment fee, at 0.5% a month, is much less than the late filing fee, although it kicks in right after Tax Day even if you get a filing extension.
All things considered, it’s a good move to file as soon as possible to avoid piling up penalties and interest, the IRS said in the tax tip, noting that taxpayers can still file electronically through Oct. 15. And taxpayers with a good track record (usually over the past three years) can ask the IRS to waive the penalties. (Though, we should warn you, it’s not easy to reach someone at the agency these days.)
The tax filing deadline was pushed to May 17 this year, more than a month past the usual April 15 date, because of the pandemic and last-minute changes to the tax code authorized by relief legislation. Changes included a special tax break for those who collected unemployment benefits in 2020.