As Tax Day approaches, many taxpayers may find themselves in a difficult position if they are unable to pay their taxes in full by the deadline. While a tax extension can provide some relief by pushing the filing deadline to October 15, it’s important to note that it does not give you more time to pay. This is a common misconception among taxpayers, according to experts in the field.
Failing to pay your taxes on time can lead to a series of financial consequences. The failure-to-file penalty can amount to 5% of your unpaid taxes per month or partial month, with a cap at 25% of the balance due. In comparison, the late payment penalty, or the failure-to-pay penalty, is 0.5% per month or partial month, with a maximum fee of 25% of the unpaid taxes. Additionally, the IRS charges interest based on current rates, which can add up quickly if you wait too long to pay.
Payment Options for Taxpayers
If you find yourself unable to pay your taxes in full by the deadline, there are various payment options available to you. The IRS offers online payment plans, known as “installment agreements,” which include short-term payment plans and long-term payment plans. The short-term plan allows you to pay in full within 180 days if you owe less than $100,000, while the long-term plan requires monthly payments if your balance is less than $50,000, with up to 72 months to pay off the balance.
You can apply for these payment plans online, by phone, or by mail using Form 9465. Experts recommend the online option for its quick and easy process. However, it’s important to note that you cannot have multiple payment plans from different tax years, as the IRS does not want taxpayers on continuous payment plans. While interest and late-payment penalties will continue to accrue after April 15, the failure-to-pay penalty is reduced under an installment agreement, providing some relief for taxpayers who are unable to pay in full.
If you find yourself unable to pay your taxes on Tax Day, it’s essential to file your return by the deadline and pay as much as you can to avoid additional penalties. Utilizing the IRS payment options can provide some relief and help you resolve your tax debt in a manageable way. It’s crucial to understand the consequences of not paying on time and take action to address your tax obligations in a timely manner. Remember, the IRS is willing to work with taxpayers who are facing financial hardships and provide options to help them fulfill their tax responsibilities.
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