Tax Day is right around the corner. If you don’t think you can make the April 15 deadline for filing your return and paying taxes, you can save on penalties and interest by calculating your payments now and filing for an extension.
File for an Extension
If you believe you won’t be able to pay your taxes by the April 15 deadline, you should file for an extension as soon as possible to avoid the failure-to-file penalty. You can only file for an extension before April 15th. An extension will give you an additional six months to file your taxes. Remember that filing an extension does not give you more time to pay your tax bill; it will save you from the 5% penalty for late filing. The late-filing penalty can be up to 10 times higher than the late-payment penalty.
Pay as Much as You Can
If you can only afford a partial amount, pay as much as you can before the filing deadline. The more you pay, the less your penalty will be. The IRS charges 0.5% penalty for failure-to-pay taxes on time, and charges interest.
As soon as filing season is over, you can request an IRS payment plan to resolve the tax debt. If you can afford to pay your full tax debt in installments, make an IRS Installment Agreement request as soon as you can. It’s a good idea to pay more in the first few months so that you bring down the total tax debt amount.
How to Make a Partial Payment
If you decide to make a partial payment of your tax bill before the deadline, do not choose the direct deposit or the credit card payment options; these methods will charge you the entire balance owed. Select the option ‘I will mail a check’ instead.
If your tax debt is less than $50,000 (with penalties and interest), you can use the IRS online payment agreement.
If you cannot pay your entire tax bill, consider taking out a loan or possibly selling an asset. If you feel you need assistance with any step in this process don’t be afraid to reach out for help from a licensed tax professional.