April 15 has come and gone. If Massachusetts residents failed to file their income tax returns or file for extensions by this date, they could face consequences if they owe money to the IRS. Unfiled tax returns could lead to substantial penalties and interest, among other things.
Those due refunds will not face any penalties for not filing a return, but there is a deadline to file the return associated with the refund or the money becomes the property of the U.S. government. However, if a Massachusetts resident does owe, that is a different story. Some people avoid filing because they owe, but that would be a costly mistake.
From the day after the filing deadline, those who owe begin accruing penalties for failing to file a return or extension. The penalty is 5% of the balance owed per month until the return is filed with a maximum of 25% of the outstanding amount owed. When compared with the 0.5% penalty assessed per month for filing but not paying, that is a significant difference. The situation gets even worse if the return is filed 61 or more days after the due date, which is when the penalty increases to the lesser of 100% of the amount owed or $205 for every month the return is not filed.
Many people have difficulties paying the amount of tax they owe to the IRS. However, the financial consequences of unfiled tax returns when money is owed only add to the problem. The IRS does offer ways to address amounts owed if a taxpayer cannot pay the whole amount at one time. However, the first step in dealing with this situation is to file the income tax return in order to limit the potential penalties associated with not doing so.