The October 15th extended tax deadline has arrived, but options remain for those unable to pay their balance in full.
Approximately 19 million U.S. taxpayers requested extensions by the April 15 deadline, moving their filing date to October 15. Taxpayers affected by recent natural disasters may have additional time, with deadlines ranging from November 1, 2024, to as late as May 1, 2025, depending on their location.
However, those impacted by federally declared disasters after April 15 did not receive extra time to pay their tax bill. Penalties and interest on unpaid balances began accumulating immediately after the April 15 deadline.
According to CNBC, many taxpayers mistakenly believe that a tax extension also extends the time to pay.
For those who missed the tax deadline, the late payment penalty is 0.5% of the unpaid balance each month or part of a month, up to a maximum of 25%. Interest on unpaid taxes also accrues.
In contrast, the failure-to-file penalty is steeper at 5% of unpaid taxes per month or partial month, also capped at 25%.
The IRS offers Several Payment Options
The IRS offers several payment options for those unable to pay their taxes in full, but you must first be up to date on your filing requirements.
Various online payment options are available after filing, and most taxpayers can get immediate approval or denial of payment plan requests without contacting the IRS directly.
If you owe less than $50,000, setting up a payment plan with the IRS is nearly automatic.
The IRS offers online payment plans, known as “installment agreements,” with two main options:
- Short-term payment plan: Available if your total balance, including taxes, penalties, and interest, is under $100,000. This plan allows you up to 180 days to pay in full.
- Long-term payment plan: For balances under $50,000 (including taxes, penalties, and interest), you can make monthly payments over 72 months.
While late-payment penalties and interest will continue to accrue, an IRS payment plan can reduce your late-payment fee by half while it’s active. However, any future tax refunds may be applied toward your unpaid balance.
Don’t Ignore Unpaid Taxes: Take Action
It’s crucial to address the issue promptly if you have outstanding tax debt. Ignoring the problem will only lead to escalating consequences.
The IRS will send notices to individuals with unpaid taxes; communicating with the agency is essential. Ignoring these notices can result in further penalties and interest.
By proactively addressing your tax debt, you can avoid severe consequences and work towards resolving the issue on time. Consulting with a tax professional can provide valuable guidance and help you navigate the options available to you. Feel free to reach out with any questions.
