If you missed the federal tax deadline, which was April 15 for most filers, it is crucial to file your return and pay your balance as soon as possible to avoid further penalties and interest. The IRS states that if you still owe taxes for the previous year, you will continue to accumulate penalties and interest until you settle your outstanding balance. The late filing penalty is 5% of your unpaid balance per month or partial month, with a maximum cap of 25% of the total balance. Additionally, the fee for failing to pay is 0.5% per month, also capped at 25% of the unpaid taxes. Interest accrues based on the current rates set by the IRS. Waiting to file your taxes increases the risk of incurring higher penalties and interest, as stated by Mark Steber, the chief tax information officer at Jackson Hewitt.
While it is essential to file your taxes promptly, it is equally important to ensure that your return is accurate. Rushing to file a return without all necessary information, such as tax forms for investments or other sources of income, can lead to errors. According to Steber, a tax return must be completely accurate with no guessing or estimating. Providing inaccurate information may result in the IRS flagging your return for audit, delays in processing, or receiving a notice from the agency. Therefore, it is advised to file an accurate return as soon as all required information is available.
For filers who missed the tax deadline, there are various online options available for making late tax payments, including IRS Direct Pay and your IRS online account. If you are unable to pay your tax balance in full, the IRS offers different payment options, including installment agreements. These payment plans cater to varying circumstances:
– **Short-term payment plan:** This option is suitable if you owe less than $100,000, including tax, penalties, and interest. You are given up to 180 days to pay the full amount.
– **Long-term payment plan:** If your balance is less than $50,000, which includes tax, penalties, and interest, you may qualify for this plan. Under this arrangement, you are required to make monthly payments, with a maximum repayment period of 72 months.
Additionally, there is a chance of qualifying for first-time penalty abatement, which DeRosa describes as a ‘get out of jail free’ request. However, eligibility for this benefit is contingent on the type of penalty and your past compliance with the IRS.
Leave a Reply