WASHINGTON, D.C. — Taxpayers who, for any reason, missed the April deadline to file their 2023 federal income tax return should not fret. The Internal Revenue Service (IRS) has brought to the fore a variety of options to aid those who find themselves on this path.
Understanding that the beyond-the-deadline tax landscape can be fraught with financial strain, the IRS has carefully designed payment programs for struggling taxpayers. If you haven’t managed to pay your taxes on time, these programs can provide an essential financial lifeline.
While promptness in paying taxes is crucial, the IRS has emphasized that partial payment is better than no payment. Paying part of your tax burden will limit the accrual of penalty and interest fees, which can quickly balloon under tax laws.
Part of the costs associated with late tax filing are penalties and interest charges, which can be daunting. The interest rate on unpaid taxes currently stands at 8% compounded daily. Late-filing invites a penalty of 5% per month, while late payments come with a 0.5% per month penalty. The two penalties have a limit of 25%.
For individuals who file their return more than 60 days late, the minimum penalty is either $485 or 100% of the unpaid tax, whichever is less. This rate is subject to change depending on the prevailing circumstances.
On the bright side, taxpayers can curb late-payment penalties and interest charges by paying their taxes electronically. Making use of the IRS Direct Pay is the most straightforward and fastest way to accomplish this. IRS Direct Pay is a free service that can be easily accessed on IRS.gov.
An important reminder to taxpayers is that requesting an extension to file is not synonymous with an extension to pay. The extension only gives you an additional six months, until October 15th, to file, and penalties for taxes owed after April 15th still apply.
On penalty relief, the IRS has offered a glimmer of hope. Taxpayers who have consistently filed and paid their taxes on time in the past three years qualify for the penalty abatement. For those who did not manage to file or pay on time due to a reasonable cause and not willful neglect, there’s a chance of qualifying for penalty relief.
Even if you find it difficult to pay your taxes, the IRS encourages you to file by the deadline to steer clear of failure-to-file penalties. The IRS has various payment options for taxpayers who owe federal taxes, and these options can be incredibly useful.
If taxpayers can’t afford to pay their taxes in full by the deadline, they should still file their tax return, pay what they can, and consider the available payment options for the balance. They can also apply for an online payment plan. These plans include short-term and long-term payment options, with varying terms and balance limits.
Moreover, some taxpayers automatically qualify for extra time to file and pay taxes without penalties and interest. These include taxpayers in certain disaster areas, U.S citizens and resident aliens living and working outside the U.S and Puerto Rico, and members of the military serving outside the U.S. and Puerto Rico, including those assigned to combat zones.
In conclusion, while late tax filing comes with certain penalties, the IRS has worked to provide helpful options for taxpayers. Understanding these options and taking advantage of them can make a significant difference in managing your tax obligations.
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