Last day to file your tax is July 15, but you can file for an extension

Following the announcement made by the IRS in March 2020, the deadline for federal tax filing was extended to July 15. The extension was triggered by the outbreak of coronavirus in the United States in the same month. This gave all Americans an extra three months to file for their 2019 without any additional penalties or payment.

However, according to IRS, if you are not yet ready to file by Wednesday, you can use the electronic filing platform "Free-File" to request an extension. When you do, you would be given an automatic extension till October, 15th. 

However, it is important to note that an extension to file is not the same as an extension to pay. Hence, when you file for an extension, ensure you pay up any tax you are owing in order to avoid further penalties. 

"After July 15, you will begin accruing late payment penalties for any amount you owe,” says Kevin Martin, principal tax research analyst at The Tax Institute at H&R Block. “Taxpayers should make an estimated payment with their request for an extension to avoid late payment penalties if they expect to owe money.”

You can easily use a free-tax calculator to find out how much you are owing.

The penalties attached to not filing and not paying are not the same, here is the difference:

• You might face a failure to file penalty if you don't file

The penalty for failure to file is 5% of your unpaid tax for each month. If you file more than 60 days late, you would be required to choose either a minimum of 100% of the tax you are owing or “a specific dollar amount that is adjusted annually for inflation,” explains the IRS. As of January, the specific dollar amount is $435 for returns due on or after January 1st, 2020.

• If you file your tax and refuse to pay, you will be charged for failure-to-pay by IRS

In this kind of situation, the IRS charges 0.5% of your unpaid tax for every month you refuse to pay up to 25% of your tax. Also, when you want to pay the tax, it attracts interest, the interest usually equal to the federal short-term rate plus 3%. It means that all unpaid taxes attract interest. 

It is advisable to file for your tax even if you don't have the money to pay yet. This is because the penalty attached to not filing is greater than not paying. And if you have already filed for your tax but don't have the money to pay, whenever you are ready, you can always apply for a payment plan with the IRS to resolve your tax debt. 

However, if you filed late while owing a refund, there is no penalty attached to this.