Tax penalties and interest for not filing a tax return on time or not paying what you owe the IRS can really hurt you. If you don’t pay attention to deadlines and details, you can multiply the amount of tax due. That sounds like a tough pill to swallow but it’s easy to avoid the situation.
No one wants to get stuck in a tough spot with IRS payments. Here are 5 things to know about tax penalties and interest:
More time, please? You can request an automatic six-month extension to file your return but you must submit the proper form. Requesting an extension electronically is the fastest and easiest way to get one. Use the IRS Free File to submit Form 4868 regardless of your income.
Pay up. Requesting an extension doesn’t mean you get more time to pay any amount due. You must estimate your tax liability on Form 4868 and pay any amount due. Make an electronic payment using IRS Direct Pay.
Watch the clock. Payments are still due by the original April 18 deadline. You should file a tax return or request an extension even if you can’t pay the full amount to avoid a costly late-filing penalty.
Do what you can. Pay as much as you can by the due date to reduce the amount subject to penalty and interest charges. The interest rate is currently 4 percent per year, compounded daily. The late filing penalty is 5 percent per month and the late payment penalty is normally 0.5 percent per month.
Make a plan. You may qualify to make monthly payments through an installment agreement with the IRS. If you owe $50,000 or less in combined individual income tax, penalties and interest, find out more and apply here.