Tax Deadline Looms: Don’t Panic, Explore Your Options
As the October 15 tax extension deadline approaches, millions of taxpayers are scrambling to settle their accounts. But what if you still can’t pay your balance? Fear not, tax experts have some reassuring news.
Natural Disasters Bring Extra Time, But Not for Payment
About 19 million U.S. taxpayers filed for an extension, giving them until October 15 to file their returns. However, those affected by natural disasters may have even more time, with new deadlines ranging from November 1 to May 1, 2025, depending on location. But here’s the catch: filers were not granted more time to pay their tax bill. Penalties and interest on unpaid balances started accruing after the April 15 deadline.
Don’t Assume an Extension Means More Time to Pay
Many taxpayers mistakenly believe that a tax extension provides more time to pay. Not so, warn experts. “That’s a surprise to a lot of people,” says Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm. If you missed the tax deadline, you’ll face a late payment penalty of 0.5% of your unpaid balance per month or partial month, capped at 25%, plus interest on unpaid taxes.
IRS Offers Payment Options, But You Must File First
The good news is that the IRS has options if you can’t pay your taxes, but you must be current on your filing requirement. After filing, you can explore various payment options online, and many filers will receive an immediate acceptance or rejection of payment plan requests without calling the IRS. “If you owe less than $50,000, establishing a payment plan with the IRS is almost going to be automatic,” says Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
IRS Payment Plans: Pros and Cons
IRS online payment plans, or “installment agreements,” can help you manage your debt. Although the late-payment penalty and interest will continue to accrue, an IRS payment plan could cut your late-payment fee in half while the agreement is in effect. One downside: future tax refunds could be used to offset your unpaid balance.
Don’t Ignore IRS Notices – Communicate and Cooperate
If you have unpaid taxes, expect notices from the IRS. Experts stress the importance of communication with the agency. “Don’t ignore it because it won’t go away,” Youngblood warns. “The IRS is not as bad as they think. They actually want to work with people.”
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