As Tax Day approaches, many taxpayers may be feeling the pressure to file their returns and pay their taxes by April 15. However, there are options available if you find yourself unable to pay your taxes by the deadline. One common misconception is that filing for a tax extension gives you more time to pay, when in fact it only extends the deadline for filing your return, not for paying your taxes. It is important to note that if you owe taxes and do not file your return by April 15, you may face additional interest and penalties, which can compound quickly.
The failure-to-file penalty imposed by the IRS is 5% of your unpaid taxes per month or partial month, up to a maximum of 25% of your total balance due. In comparison, the late payment penalty, or failure-to-pay penalty, is 0.5% per month or partial month, with a maximum penalty of 25% of the unpaid taxes. The IRS also charges interest on the outstanding balance based on current rates. Therefore, it is crucial to file your return by April 15 and pay as much as you can to avoid accruing additional penalties and interest.
If you are unable to pay your taxes in full by the deadline, the IRS offers various payment options to help you settle your tax debt. One option is a short-term payment plan, which allows you to pay off your balance in full within 180 days if you owe less than $100,000, including taxes, penalties, and interest. Another option is a long-term payment plan, which gives you up to 72 months to pay off your balance if it is less than $50,000. You must make monthly payments under this plan.
You can apply for either a short-term or long-term payment plan online, by phone, or by mail using Form 9465. However, experts recommend using the online option for a quick and easy application process. It is important to note that the IRS does not allow multiple payment plans for different tax years, as they aim to avoid continuous payment plans. While you may still accrue interest and late-payment penalties after April 15, the failure-to-pay penalty is reduced by half under an installment agreement.
If you are unable to pay your taxes in full by the April 15 deadline, it is essential to file your return and pay as much as you can to avoid additional penalties and interest. The IRS offers various payment options, including short-term and long-term payment plans, to help you settle your tax debt. Applying for a payment plan online is a quick and easy process, and can provide immediate feedback on your acceptance or denial. It is important to explore these options and take proactive steps to resolve your tax obligations in a timely manner.