The consequences differ depending on whether you owe the IRS money or the IRS owes you a refund.
If you are getting a refund
This is one of the great little secrets about the Federal tax law. If you have a refund coming from the IRS—as about three out of four taxpayers do every year—then there is no penalty for failing to file your tax return by the deadline, even if you don't ask for an extension. As noted below, the penalty for filing late is a percentage of the tax owed with the return. And even 100 percent of $0 is $0. However, this might not be the case for state taxes.
That's not to say there aren't very good reasons for filing on time. Even if you have a refund coming, consider the following:
- You can't get your money back until you file, so you should file as soon as you can to get your money as soon as possible.
- The statute of limitations for the IRS to audit your return won't start until you actually file your return. So the sooner you file, the sooner the clock starts ticking.
- Some rather arcane elections must be made by the due date, even if you have a refund coming. This applies to a very tiny percentage of taxpayers.
If you have a balance due
If you haven't paid at least 100 percent of the tax you owe by April 15, 2014 you'll end up owing a late payment penalty of 0.5 percent per month until the tax is paid. The maximum late payment penalty is 25 percent of the amount due. You'll also owe interest on whatever amount you didn't pay by April 15.
If you didn't get an extension, you are also looking at a late filing penalty of 5 percent of the unpaid tax per month plus interest. The maximum late filing penalty is 25 percent of the amount due.
Beware: No statute of limitations
Regardless of whether you are due a refund or owe, there is another point to keep in mind: If you never file your return, there is no limit on how many years the IRS can go back to assess and collect tax.
So, one way or the other, there are compelling reasons to get on with it and file your return. And TurboTax makes it so easy, there's really no reason to wait.