America's annual tax reckoning is here once again and for many who have yet to file their federal tax return, that means a mad dash to beat Uncle Sam's deadline.
The Internal Revenue Service already has received nearly 100 million tax returns, but anticipates getting about 35 million more by the midnight Tuesday deadline.
Many other taxpayers, however, are opting for plan B and asking for more time to file.
The IRS expects roughly 12 million taxpayers will make such a request before the tax filing deadline, enabling them to take an additional six months — until Oct. 15 — to prepare their tax return.
Getting started late and rushing to file can lead to headaches, particularly if you haven't organized the various receipts and forms, such as bank statements or W-2 forms that you may need to complete your return.
"When you sit down to do your return at the last minute, if you're realizing you're stuck, don't know what's happening or have an unexpected result and need more help, the best thing to do would be to file for an extension," said Lindsey Buchholz, a principal analyst at H&R Block.
MORE TIME TO FILE, NOT PAY
If it looks like you're not going to make the deadline, and you owe unpaid taxes, it pays to ask for more time. That's because if you miss the deadline and fail to ask for an extension, the IRS will hit you with a monthly penalty of 5 percent of your unpaid tax balance. The quickest way to request an extension is to fill out the automatic extension of time to file - Form 4868 on www.irs.gov . It's also available through most tax preparation software.
Extension requests via mail must be postmarked by Tuesday to be considered on time. Forms filed on the IRS website or by using tax software can be sent in as late as 11:59 p.m. EDT on Tuesday.
Getting more time to file your return doesn't mean you have more time to pay your 2013 tax bill, however.
"Some people mistakenly think that if they owe money and they file an extension that also gets them an extra six months to pay, which is not the case," Buchholz said.
The IRS requires taxpayers to pay up by Tuesday's deadline, or face interest charges on unpaid taxes.
LATE PAYMENT PENALTY
If you file your tax return on time or get an extension, but fail to pay, the IRS will charge a monthly late payment penalty of 0.5 percent of your unpaid taxes. That translates to a $25 penalty if you owe $5,000. It is charged each month or part of a month the tax goes unpaid, up to 25 percent, or $1,250 on that $5,000.
In addition, the IRS will assess an annual 3 percent interest rate, compounded daily, on what you owe.
You can avoid the 0.5 percent late-payment penalty if you pay either 90 percent of your 2013 tax balance by April 15, or if you pay an amount equal to the full amount you paid on your 2012 tax return. For example, if you estimate that you owe $9,000 in taxes for 2013 and you pay 90 percent of that, or $8,100, you won't be charged the penalty. Paying what you paid in taxes last year also would spare you the penalty.
Filers who haven't sorted out their tax return yet and don't know how much they owe can send the IRS a payment based on an estimate of their tax debt. You can use IRS Form 1040-ES, Estimated Tax for Individuals, to calculate what you owe.
If your earnings were roughly the same in 2012 as in 2013, the easiest way to estimate what you owe is to add in slightly more than you owed last year. If you overpay, you'll get a refund after you file your return. If you underpay, you'll have to pay a penalty and interest on the difference.
The IRS accepts payments by check, online or by phone using a credit or debit card. More details on making payments are available on the IRS website.