Late Tax Payment
If you already owe the IRS money, it’s best to make it as little as possible. No reason to accrue unnecessary fines, fees, interest, and penalties. Late tax payment can cause all of these things. Learn how to avoid them.
Late Tax Payment: Things To Know
In the instance that you’ve had to pay taxes, for whatever reason, after the April 15th due date, here are some things to keep in mind.
- You May Be Fined Twice – In the case that you still owe taxes, on top of the failure to file penalty for filing late, you may be fined for paying late, as well.
- Minimum late filing penalty – If you file after more than 60 days after the due date, you can expect to pay a fee of $135, or 100% of the overdue unpaid tax.
- Late Filing Penalty – Failure to file, for filing late, can result in a penalty of 5% of the unpaid tax amount, per month or portion of month, up to 25% of the total amount owed
- Late Payment Penalty – Failing to pay your taxes owed, entirely, by the due date can result in a fine of .5%, per month, up to 25% of the overall unpaid taxes
- Combined Penalties – In the instance that both late payment and late filing penalties apply, they will be combined to a maximum of 5% per month
- Always File Your Taxes – Even if you can’t pay, always file your taxes by April 15th, as the failure to file penalty can be up to 10 times more than the late payment penalty
- You Can File For An Extension – If you feel that you won’t be able to pay your taxes, in full, on time, you can request a payment extension of up to 90 days, and avoid both late tax payment and late filing penalties.
- Probable Cause – Late tax and filing penalties need not apply if you can prove sufficient probable cause for late tax payment.
Ways To Avoid Late Tax Payments
People filing late, or being unable to pay their taxes in full has become increasingly common in recent years. The IRS understands, up to a point. Here are some things you can do to help avoid the fees associated with late tax payments.
Thanks to The Great Recession, the IRS rolled out their Fresh Start program in 2011, as a way to help struggling taxpayers. The most significant effect of the Fresh Start program is the ability for a taxpayer who’s been unemployed for more than 30 straight days to file an extension for up to six months, without paying any penalties. Those who have suffered from natural disasters or been active in military duty may also apply for an extension.
Come Up With The Money
In case you don’t qualify for any of the above categories, but don’t want to incur unnecessary fees or penalties, you may consider shuffling around your assets a bit, to earn the least possible debt. Some possible ways to come up with the money include putting your overdue taxes on a low interest credit card, getting a home interest loan, or asking the IRS to accept a formal installment plan.
An installment plan from the IRS is likely to be much, much lower than the interest rates on a credit card, which can be as high as 15% as well as including a conveniene fee that can add another 2% – and is a much better option, if you qualify.
To learn more about late tax payments, or qualifying for a payment installation plan, consult with one of our tax professionals today.