There is no direct penalty for failing to file income taxes – as long as no money is owed to the government. If money is owed, then there are multiple direct and indirect penalties to be aware of and to pay as quickly as possible. Wesley Snipes is a prime example of someone that avoided paying their income taxes and is now facing the ultimate penalty, time in jail.
The tax deadline is April 15. The tax return must be postmarked on that date, or it is considered late. If the Form 4868 is filed before April 15, it is possible to receive a six month extension. This cancels the late filing penalty, but the filer will still have to pay a late payment penalty.
If a tax return is not filed, there can be no tax refund. A late tax return can be filed up to four years later, but after that deadline, the refund is forfeited. If an exclusion or exemption was used or relied upon, the tax filer may waive that exclusion or exemption, leaving the tax filer responsible for the tax due.
The late filing penalty is five percent of the amount due every month the return is late. The five percent penalty is charged starting on April 16. This penalty increases to ten percent on May 16. This charge is capped at twenty-five percent. If the return is filed sixty days late or more, the penalty is the lesser of $100 or 100 percent of the amount you owe. An interest penalty of eight percent applies as of 2011. This penalty is not capped, and is simple interest, instead of compound. If the return is filed late but is not payed until even later, a failure to pay penalty of 0.5 percent of the amount due, capped at 25 percent, will apply instead if it is greater than the failure to file penalty. These penalties cannot be applied at the same time.