With just more than two weeks to the tax filing deadline, financial experts are digging in and urging taxpayers to get a move on. And this year there may be an especially good reason: the average refund is 10% bigger than last year’s.
So far, about half of all taxpayers have filed, and refunds have averaged $3,036, up $266 over last year’s, according to the IRS. Tax cuts in last year’s economic stimulus legislation are the main cause.
Most individuals received a $400 tax credit, couples $800. While many people got this through reduced paycheck withholdings, others will get it in a refund. The American Recovery and Reinvestment Act of 2009 also included a $2,500 credit for college expenses and an $8,000 credit for first-time homebuyers, among other benefits.
Even if you are not expecting a refund, there are good reasons to get your return done on time, according to the tax advice firm CCH.
Most important is avoiding a penalty for failing to file. The penalty is 5% of the tax due for every month, or part of a month, you are late, up to 25%. If you don’t file within 60 days of the due date, the penalty is $135 or 100% of the tax due, whichever is less.
There’s also an interest charge on late tax payments — 0.5% of the unpaid tax every month you are late, up to 25%. “If you file late and owe both failure-to-file and failure-to-pay penalties, the failure-to-file penalty may be reduced by the failure-to-pay penalty,” CCH says.
If that seems confusing, file and pay on time and you won’t have to worry about it. Get a six-month extension to file by submitting Form 4868. Remember that getting an extension to file does not allow you to postpone paying. You’ll still face the late-payment penalty if your tax isn’t paid by the due date (April 15 for most people).