If you missed the federal tax deadline, experts advise that you should file your return and pay your balance as soon as possible. Failure to do so can result in penalties and interest accumulating on your outstanding balance. The late filing penalty is 5% of your unpaid balance per month, capped at 25% of your balance. Additionally, the fee for failure to pay is 0.5% per month, with a maximum fee of 25% of unpaid taxes. Interest rates are based on the current rates set by the IRS.
It is crucial to ensure that your tax return is accurate before filing. Rushing to file without all the necessary information, such as tax forms for investments or other earnings, can lead to consequences. Mark Steber, chief tax information officer at Jackson Hewitt, emphasizes the importance of accuracy, stating that there should be no guessing or estimating when filing your return. Inaccurate information could result in an audit by the IRS or processing delays, so it is essential to wait until you have all the required information before filing.
For individuals who cannot pay their tax balance in full, the IRS offers various payment options. One option is the short-term payment plan, which allows individuals to pay off balances of less than $100,000 including tax, penalties, and interest within 180 days. Another option is the long-term payment plan, which is available for balances less than $50,000 and requires monthly payments over a period of up to 72 months.
In some cases, individuals may qualify for first-time penalty abatement, which is a request to waive penalties imposed by the IRS. Nicole DeRosa, a tax partner at accounting firm Wiss & Company, describes it as a “‘get out of jail free’ request.” However, eligibility for first-time penalty abatement depends on the type of penalty and your compliance history with the IRS.
There are several online options available for late tax payments, including IRS Direct Pay and your IRS online account. These platforms make it convenient for individuals to make payments and set up installment agreements if they are unable to pay their balance in full. It is essential to explore these online payment options and choose the one that best suits your financial situation.
Missing the federal tax deadline can have serious consequences, including penalties, interest, and potential audits by the IRS. It is crucial to file your return and pay your outstanding balance as soon as possible to avoid further financial repercussions. Ensure that your tax return is accurate before filing to prevent inaccuracies that could lead to processing delays or notices from the IRS. Explore the various payment options offered by the IRS, including installment agreements and first-time penalty abatement, to help manage your tax balance effectively.