# Tax Additions: Situations Requiring You to Pay Extra Income Tax

Everyone loves getting tax breaks, but what can really impact your finances is forgetting about tax additions – extra taxes and fees you owe for income that should be reported when you file your income taxes.  Forgetting to include this income and not paying the taxes owed on this amount will hurt you in the long run.  Taxpayers are charged interest on the outstanding tax balance from the date taxes are due (April 15) until the taxes are paid in full.

This means if you fail to include all of your tax additions in your annual return and get selected for an audit later, you will be charged interest for the entire period between when your taxes were due and when the error was found.  Understanding the additional taxes you might owe and the tax credits and deductions you may qualify for are both important in keeping your finances healthy.

## Why do tax additions exist?

Generally speaking, the government wants to make it as easy as possible for you to pay your taxes, so most people do not have any significant tax additions to report. Their main source of income is their earned wages.  However, many individuals earn extra income beyond their wages, and the taxes owed on this income has not yet been reported to the IRS.  It is your responsibility to include these tax additions when you file your income taxes.

## Late Filing Fees

Late filing fees represent “extra money” you may need to pay when you are filing your income taxes.  If you do not file your taxes by the deadline, usually the middle of April, you can be charged both a failure-to-file penalty and a failure-to-pay penalty (if you owe money to the IRS).   Currently the fee for filing late is 5% of the unpaid taxes for each month or part of the month that your taxes are late.  And the fee for paying late is .5% of your unpaid taxes.  The IRS website says that “You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return.”

This should help you see how important it is to file your income tax paperwork on time, even if you owe tax and cannot fully pay it. If you need extra time to file your taxes, for example if you are waiting for some paperwork relating to extra income you need to report, you can also file for a short-term extension.  This will give you an additional 120 days to file with no late fee penalty. Click Here for the IRS article on late fees.

## Pop Quiz

If reading this article was an Assignment, get all 3 of these questions right to get credit!

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1 of 3) Which of the following forms is reported to your employer, not the IRS?
2 of 3) Which income is typically the easiest to report?
3 of 3) Which penalties will you incur if you file your taxes late?