While nearly 80 percent of taxpayers received tax refunds averaging close to $3,000 last year, others owed taxes. What should taxpayers who can’t pay by the April 15 filing deadline do?
First and foremost, taxpayers should file a return or an extension to file even if they can’t pay. The penalty for not paying any taxes owed in full is 0.5 percent of the unpaid balance per month, but the monthly penalty for not filing a tax return is 10 times that amount (5 percent per month). Both of these penalties have a maximum of 25 percent of the balance due.
If both penalties apply, the 5 percent failure to file penalty is reduced by the 0.5 percent failure to pay penalty so the maximum penalty that will be assessed is 5 percent of the balance due per month. When the failure-to-file penalty maxes out at 25 percent, the failure-to-pay penalty continues to run until it also reaches 25 percent.
Texas Specific Tax Issues
Nearly 1 million taxpayers have until April 15 to claim nearly $760 million in 2010 unclaimed tax refunds. Half of these taxpayers are due more than $571 and all they have to do to get it is file a 2010 tax return.
In Texas the average medium potential refund is $588 with more than an estimated 80,000 Individuals who did not file a 2010 return with a potential refund.
One major expiring tax break is the State and local general sales tax deduction. This will impact the 2.3 million Texas returns that use the sales tax deduction.