**Tax Extension Deadline Looms: What to Do If You Can’t Pay Your Balance**
The October 15 tax extension deadline is approaching, but what if you still can’t pay your balance? Experts say you have options, but it’s essential to understand the consequences of missing the deadline.
If you filed for a six-month extension, you may think you’re off the hook until October 15. However, unpaid taxes continue to accrue penalties and interest, which can add up quickly. In fact, the late payment penalty is 0.5% of your unpaid balance per month or partial month, capped at 25%. You’ll also incur interest on unpaid taxes.
Fortunately, the IRS offers options for those who can’t pay their taxes in full. But to take advantage of these options, you must be current on your filing requirements. This means you need to have filed your tax return, even if you can’t pay the full amount owed.
One option is to set up an online payment plan, also known as an installment agreement. This allows you to make monthly payments towards your unpaid balance. While the late-payment penalty and interest will continue to accrue, an IRS payment plan can reduce your late-payment fee in half while the agreement is in effect.
It’s essential to communicate with the IRS if you have unpaid taxes. Ignoring the issue won’t make it go away, and you can expect to receive notices from the agency. However, experts say the IRS is willing to work with taxpayers who are struggling to pay their balance.
If you owe less than $50,000, establishing a payment plan with the IRS is often automatic. You can apply online and receive an immediate acceptance or rejection of your payment plan request without calling the IRS.
Remember, future tax refunds may be used to offset your unpaid balance if you have an IRS payment plan in place. But by taking action and communicating with the IRS, you can avoid further penalties and interest and get back on track with your taxes.
Leave a Reply