Why Should I File Before the Deadline?
Over the past several years, there has been a growing trend for taxpayers to wait until after the tax-filing deadline before filing their tax returns. Last year, more than 3.5 million taxpayers filed in May. Why is this a bad idea?
There is a misconception that the late-filing penalty is actually a late- payment penalty, assessed on people who do not pay their taxes by the due date. This leads some people to believe that there is no point filing the return if they do not have the money to pay the amount owing.
Make sure clients realize that although the calculation of penalty is based on the amount owing (5% of your balance due, plus 1% for every month that your return is late for a maximum of 12 months), it is only assessed if you file late. Yes, you will be charged interest if you cannot pay right away, but at least you will avoid the penalty if you at least file by the deadline.