One Week to Go
Tax Deadline is next Tuesday and we review what you need to file an extension
The tax deadline for individual tax returns is next Tuesday April 15. Most farmers have likely filed by now, but if you need to file an extension, it is important to understand this is only an extension of time to file, not to pay the tax owed.
I had a conversation with a farm family a while back and they had not realized that last year when they filed for an extension and was surprised to see a billing for interest and penalties.
If you pay in all of the tax owed or more than the amount owed, then there is no penalty or interest owed.
However, if you pay less than final tax amount due by April 15, then any extra tax owed when you finally file by October 15, 2025, will accrue interest. Interest changes quarterly and the current interest rate is 7% good through June 30, 2025.
Plus, you owe an additional .5% penalty for every month you are late. One day equals a month so if you paid it on September 1, you would still owe the .5% penalty for that month. This is called the late-payment penalty.
This essentially equates to a 13% annual rate and can be higher depending on the day of the month that you make the payment. The maximum penalty for paying taxes late is 25%.
Therefore, the bottom-line is don’t skimp on paying your taxes with your extension. We doubt if you are paying 13% on any operating line that you have.