Experts are warning of a little-known Tax Day mistake that could cost Americans hundreds of dollars.
The April 15 federal income tax filing deadline is right around the corner, and millions of people have yet to file their returns.
Taxpayers have until midnight on April 15 to submit their return to the Internal Revenue Service (IRS).
But expert David Straughan warns that Americans can ignore time zones when it comes to meeting the deadline, meaning the deadline is actually up to three hours early in some parts of the country.
Tax penalties will apply even if your return is delayed by a few minutes and can add up to hundreds of dollars.
Experts warn of little-known Tax Day mistake that could cost Americans hundreds of dollars
“One thing people may not think about when it comes to tax deadlines is time zones,” said Straughan, a researcher and writer for MarketWatch Guides.
‘The IRS is located in Washington, DC, which operates outside of Eastern Standard Time (EST). That means the deadlines you set are based on EST.
“So when the IRS says the deadline is midnight on April 15, that deadline is actually 9 p.m. on the West Coast, 10 p.m. in the Mountain Time Zone, and 11 p.m. in the Mountain Time Zone. central time”.
He cautioned that it doesn’t matter if you miss the filing deadline by a few days or a few minutes: late is late in the eyes of the IRS.
“Tax penalties start accruing as soon as you’re late on filing if you owe money,” he said.
The IRS imposes a penalty for filing your return late and another for paying your taxes late.
“One thing people may not think about when it comes to tax deadlines is time zones,” said David Straughan, researcher and writer for MarketWatch Guides.
The penalty for failure to file is typically 5 percent of the tax due for each month or part of a month late in filing, with a maximum penalty of 25 percent.
For example, if you owe $1,000 in taxes, you’ll pay $50 for each month or partial month your return is late.
If your return is more than 60 days late, the minimum penalty for failure to file taxes is $485 or the total amount of tax owed, whichever is less.
The late filing penalty peaks after five months of being late on your return, but other fees and interest may continue to accrue.
Generally, there is no penalty for failure to file if you owe nothing and your return ends with a refund. But if you are required to file, you should still plan to file as soon as possible to recover the funds.
Meanwhile, the late payment penalty is a separate fee that is assessed if you don’t pay your tax bill.
This fee is 0.5 percent of your unpaid bill for each month a balance is due, with a maximum payment of 25 percent of outstanding funds.
Unpaid money will also begin to earn interest, which is 8 percent annually and is compounded daily, meaning it will add up quickly.
If you owe taxes and do not file or pay on time, you will be assessed both the failure to file penalty and the late payment penalty.
The IRS imposes a penalty for filing late and another for paying your taxes late (Pictured: IRS Commissioner Danny Werfel)
If you are worried about not being able to file your return on time, you might consider requesting an extension.
Residents of some states have already been granted specific extensions due to natural disasters, while others have slightly later filing deadlines due to holidays.
For out-of-state residents, if you apply for and receive an extension, the application deadline will be delayed to October 15.
However, doing so does not mean you have an extension to pay your taxes, so you will still face a late penalty if you owe money.