What happens if you file taxes late?

Filing season is a busy time of year for Americans and individuals who missed the April 17 tax deadline should still submit their tax forms to the Internal Revenue Service. While they may incur fees and penalties, when it comes to taxes, it's better to file late than to not file at all.

For individuals who missed the tax deadline this year, it's important to know what to expect. First and foremost, individuals can still e-file their returns through October 15, 2012. However, those who owe a tax bill can expect penalties and fees to be levied on the amounts they owe. The IRS will charge interest that is compounded daily on the unpaid tax amount. The interest rate is currently the federal short-term rate, plus three percent. In addition, the rate will change on a quarterly basis.

Consumer who pay late will also face penalties, which currently sit at 0.5 percent, in addition to a late filing penalty of 4.5 percent of their unpaid balance. Further, the penalty maxes out at 47.5 percent, which is broken down as 22.5 percent for filing late and 25 percent for paying late.

Individuals who owe a tax bill but do not have the funds to cover the full amount should still file their taxes. There are several programs they may qualify for that will help them cover their tax bill. For example, adults may enroll in the IRS installment plan, which allows them to set their monthly payments, so long as they pay a minimum of $25 each month, plus interest. In addition, the IRS recently changed the rules regarding liens, raising the threshold from $5,000 to $10,000. This may not only help struggling families avoid the legal complications of liens, but also protect their credit scores. Filers with incomes of up to $100,000 and a tax liability of less than $50,000 may also apply for an offer in compromise, in which the IRS may forgive a portion of the taxpayer's debt.

Taxpayers who have not filed their taxes and are unsure of their options should consult a tax preparer immediately, and gather the paperwork they need to complete the process. While they may receive penalties and interest for filing and paying late, completing their taxes as soon as possible will help them tackle their balance and avoid additional costs.

Liberty Tax Service provides computerized income tax preparation and electronic filing. Each tax office offers customers audit assistance, a money back guarantee, and free tax return checking.

About Liberty Tax Service 
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history.  Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns.  With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.   

Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,” and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.