Your state tax collector will definitely not refuse your offer to pay your back taxes a year late. Not paying them late is much better than never paying them, as the penalties on your unpaid tax debt mount up when you wait. The sooner you pay your back tax, the happier your bank account will be.
The state penalties start accumulating as soon as you miss your filing date. In California, for example, the state bills you a 5 percent penalty immediately. On a $2,000 tax bill, that's $100 extra. The state adds .5 percent interest a month to that, up to 40 months, with a maximum of 25 percent -- $500 interest on $2,000. Michigan moves faster: It penalizes you 5 percent the first two months you're late, then 5 percent each month after that. You reach the 25 percent maximum after six months.
It Gets Worse
The longer you wait, the more trouble your unpaid bill creates for you. New Jersey, for example, compounds the interest: if you have a 7 percent penalty charge at the year's end, the state charges interest on that in addition to the original tax bill. If you owe state property taxes rather than income tax, the government will eventually take your land and sell it off to settle your tax bill if you don't pay the debt first.
Confession Is Good
One way to avoid the penalties is if your state has a tax amnesty program. New York, for example, has a voluntary disclosure program for people who owe the state any sort of back tax. You admit you screwed up and pay the back taxes; in return, the state waives penalties and any possible criminal charges. You also have to agree to pay your taxes faithfully in the future.
Other states offer other ways out if you're stuck with a big, past-due tax bill. California, for example, will waive the interest on your bill if you fit into certain categories -- for example, if you couldn't pay because of disability or other "catastrophic" hardships. If you missed your due date because of an earthquake or other disaster, or the state government gave you bad tax advice, those would also be grounds for ignoring the usual interest.
- California Franchise Tax Board: If I Pay My Taxes Late, What Interest and Penalties Will I Be Charged?
- Michigan Department of the Treasury: Penalty and Interest Added for Paying or Filing Late
- New Jersey Division of Taxation: NJ Income Tax - Penalties and Interest
- New York State Department of Taxation and Finance: Voluntary Disclosure and Compliance Program
- California Franchise Tax Board: Interest Abatement