IRS: Missing your deadlines and owing money

Taxpayers who miss the deadline

If you missed the April 15 tax filing deadline, don’t panic. Here’s some advice from the IRS.

File as soon as you can. If you owe taxes, you should file and pay as soon as you can. This will help minimize the interest and penalty charges. There is no penalty for filing a late return if you are due a refund.

IRS Free File is your best option. Everyone can use IRS Free File to e-file their federal taxes for free. If your income was $58,000 or less, you can use free brand-name software. If you made more than $58,000 and are comfortable preparing your own tax return, use Free File Fillable Forms to e-file. This program uses the electronic versions of paper IRS forms. IRS Free File is available through Oct. 15 only through IRS.gov.

IRS E-file is still available. IRS e-file is available through Oct. 15. E-file is the easiest, safest and most accurate way to file your taxes. With e-file you receive confirmation that the IRS received your tax return. If you e-file and choose direct deposit of your refund, you’ll normally get it within 21 days.

Pay as much as you can. If you owe tax but can’t pay it all at once, try to pay as much as you can when you file your tax return. Pay the remaining balance as soon as possible to stop further penalties and interest.

Make a payment agreement online. If you need more time to pay your taxes, you can apply for a payment plan with the IRS. The easiest way to apply is to use the IRS Online Payment Agreement tool. You can also mail Form 9465, Installment Agreement Request. The tool and form are both available on IRS.gov.

A refund may be waiting. If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may still get a refund. This could apply if you had taxes withheld from your wages or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.

Filing, paying late

April 15 is the tax day deadline for most people. If you’re due a refund there’s no penalty if you file a late tax return. But if you owe taxes and you fail to file and pay on time, you’ll usually owe interest and penalties on the taxes you pay late. Here are eight facts that you should know about these penalties.

If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can. You should try other options to pay, such as getting a loan or paying by credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.

The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax

The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.

If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

Owing taxes

If you owe taxes but can’t pay in full, the IRS has options for you. Most importantly, make sure you file your tax return and pay as much as you can. Then let the IRS help you choose your best option to pay. Here are some options to consider, even if you can’t pay the full amount right now:

Borrow the money. If you don’t have the money to pay all your taxes now, then you may want to get a loan from a bank or other source. The interest rate may be lower than the interest and penalties the IRS charges on late taxes. You also may be able to borrow against your assets or sell them to raise cash.

Make an Online Payment Agreement. If you are unable to pay in full, then consider paying over time. If you owe $50,000 or less, you can apply for an installment agreement. You may choose to make convenient monthly direct debit payments for up to 72 months. With this option, there are no checks to write or send. And you won’t miss a payment or pay late. The best way to apply is to use the IRS Online Payment Agreement tool on IRS.gov. If you don’t have access to the Internet, you can apply by filing Form 9465, Installment Agreement Request.

The IRS can also help if your tax debt is more than $50,000 or you need more than six years to pay. In these cases, the IRS may ask for further financial information. See Form 433-A or Form 433-F, Collection Information Statement.

Use an Offer in Compromise as a last resort. An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable time. The IRS looks at several factors to make a decision on your offer. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.