Deadline to Avoid Tax Penalties Is Quickly Approaching: What to Know

by Josh Lanier
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(Photo by Tim Boyle/Getty Images)

The IRS is warning those who didn’t pay enough income tax last year to pony up by Jan. 18 to avoid any surprise bills later. The final quarterly payment for 2021 is due on Tuesday.

Most people have their income taxes withheld from their paychecks, but if you didn’t, you need to make quarterly payments. This mostly applies to people who receive money from self-employment jobs, small businesses, investments, and gig economy workers, the IRS said.

“Everyone needs to pay taxes,” said Bryan Hasling, partner at Lodestar Private Asset Management in Alamo, California. “And the IRS strongly prefers that you pay them steadily across the year as opposed to waiting until the last minute — which is tax day (April 18).”

You can view your balance by logging into your IRS online account. The agency also has a Tax Withholding Estimator tool on its website. Though, it’s down until “late January.”

You can make a payment using IRS Direct Pay or find more options at IRS.gov/payments.

It’s best to pay now as the late payment fees increase with delay. The fee is 0.5 percent of your balance, but it increases every month until it’s paid.

IRS Asks People To E-File This Year, Tax Day Returns to April

The IRS is working through a backlog from last year’s tax season. So if you want to get your tax return on time this year, you’ll need to file early and online.

“Planning for the nation’s filing season process is a massive undertaking,” said IRS Commissioner Chuck Rettig in a statement. “And IRS teams have been working non-stop these past several months to prepare. The pandemic continues to create challenges. But the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays.”

The IRS will process your return in 21 days on average if you file online with direct deposit. It will be much longer if you submit any physical paperwork.

“I am deeply concerned about the upcoming filing season,” said the National Taxpayer Advocate, Erin M. Collins. “Paper is the IRS’ Kryptonite, and the agency is still buried in it.”

The agency still had more than 6 million unprocessed individual tax returns from last year in December. Accountants had another 2.3 million amended returns left to process as well, CNBC said. There was also a backlog of taxpayer mail. There are 5 million pieces they still need to get through, with some dating back to April.

Also, make sure your return is accurate. You’ll likely face delays if the total amount is incorrect.

You also have a shorter window this year than last to send in your tax returns. The IRS moved Tax Day from April 15 to May 17 last year to give people grappling with the COVID pandemic more time. Your tax return is due on April 18 this year unless you apply for an extension.

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