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Missed the April filing deadline? A number of options are available to help taxpayers who missed the April deadline to file their 2023 federal income tax return.
The interest rate for an individual's unpaid taxes is currently 8%, compounded daily. The late-filing penalty is generally 5% per month and the late-payment penalty is normally 0.5% per month, both of which max out at 25%.
If a return is filed more than 60 days after the due date, the minimum penalty is either $485 or 100% of the unpaid tax, whichever is less. The failure to pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached. The rate is subject to change.
Taxpayers should file their tax return and pay any taxes they owe as soon as possible to reduce penalties and interest. An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filing deadline of Oct. 15. Penalties and interest apply to taxes owed after April 15 and interest is charged on tax and penalties until the balance is paid in full.
Qualify for penalty relief
Anyone who receives a penalty notice from the IRS should read it carefully and follow the instructions for requesting relief.
Taxpayers who have filed and paid on time and have not been assessed any penalties for the past three years often qualify to have the penalty abated. A taxpayer who does not qualify for this relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect.
In addition to penalties, interest will be charged on any tax not paid by the April 15 due date and any assessed penalties. Interest stops accruing as soon as the balance due is paid in full. The law does not allow for interest abatement based on reasonable cause or first-time relief.
Having trouble paying?
Taxpayers that are unable to pay in full by the tax deadline should still file their tax return, pay what they can and explore a variety of payment options available for the remaining balance. The IRS offers several options to help them meet their tax obligation, including applying for an online payment plan.
Payment plan options include:
Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.
Long-term payment plan – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.
Keep in mind that the interest and late-payment penalties continue to accrue on any unpaid taxes after April 15, the failure to pay penalty is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS’ Additional information on payment plans webpage.
Some taxpayers get automatic extensions
Some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:
Taxpayers in certain disaster areas. There’s no need for these taxpayers to submit an extension; extra time is granted automatically due to the disaster.
U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico.
Members of the military on duty outside the United States and Puerto Rico, and those serving in combat zones.
Reach out to WHITNAH CPA for additional assistance at 678-780-8615.
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