The April 15th tax filing deadline is here at last! Before the midnight of April 15th, if the IRS does not receive your tax return with at least 90% of the full payment of your tax bill, it will begin charging penalties and interest on the taxes due to be paid. Filing for an extension helps to avoid steep penalties and interest on the unpaid taxes. Penalty for late filing of taxes is 5% for each month that the tax return remains unfiled. The maximum penalty the IRS can charge for a month is 25% of the unpaid taxes.
To date, more than 100 million tax returns have been filed and more than 12 million are expected to file for an extension. It is important to note that the extension to file only provides six more months to file the tax return for the previous year. It does not mean more time to pay the previous year’s taxes. Even if you file for an extension, you need to pay an estimated amount of taxes that you owe before the April 15th deadline.
If you cannot pay the entire amount of taxes owed, you should pay as much as you can before the deadline. This will bring down the amount of your back taxes and will thereby reduce the penalties and interest charged on it. It is advisable to contact a tax professional to choose the most appropriate method to pay the balance.
If you cannot pay any amount of taxes owed due to a financial crisis, you should immediately hire a tax service to consider postponing payment of tax debt using an IRS payment plan.
Filing on time is always your best option because it saves you from harsh penalties and interest, which can significantly increase the original back tax amount. Unpaid and unfiled taxes may also result in forced collection actions from the IRS if no effort is made to resolve the debt. Even in cases where a taxpayer cannot pay any amount of taxes owed, it is essential to resolve the case as soon as possible. Unresolved cases where the taxpayer avoids communication with the IRS or refuses to cooperate may result in a tax lien or a tax levy where the IRS seizes and sells property/assets to fulfill tax debt.