This is the penalty for not filing your return by the due date (including extensions). It is only applied if there is a balance due on your return. The penalty is a 5% on the balance that you still owe, calculated per month, but maxed at 25%.
Think of this as a late payment fee. It is a penalty ranging from ½ to 1% of you unpaid taxes, calculated monthly. It is also maxed out at 25%.
There are a few variables that take too long to explain here, but basically: The governments expect their money to be sent to them throughout the year (by quarterly estimated payments or paycheck withholding). When you don’t pay on time, the government is loaning you the money, so you get to pay the interest. Penalties are imposed to encourage compliance.
While we sympathize with you over the frustrations of not being able to get everything done and completed on time, we would like to encourage you to still extend with us, rather than go off and find any willing body to prepare your taxes. Joe's saying is always: Better to do your taxes late and right, rather than in a rush and wrong.
There are other advantages: You get to talk with us after tax season, when we have all of the time in the world to chat, rather than being squeezed into 30 min time increments while being sleep deprived from working 70-80 hrs a week.
We do over 700 extensions a year, so you are not alone. After tax season, we will take a day or two break, and then pick up where we left off. Most are completed by mid-May. Those who send in their completed workbook and other information, will be put in a queue and kept in order, so still send us your information ASAP.
Extensions are FREE! We don't have the heart to charge for them. Fill in an submit the form at the bottom of the page and you are done. If there are any issues we will contact you via phone or email.