The Internal Revenue Service (IRS) doesn’t mess around when it comes to missed tax deadlines. Failure to meet these deadlines can lead to hefty penalties. But hey, the good news is the IRS does offer a few ways to help ease the burden of paying off your tax debts.
So, here’s the deal – under tax laws, missed payments can clock up an 8% daily interest. On top of that, late tax payments could get slapped with a 0.5% penalty, capped at 25% in total.
In a recent statement, the IRS urged taxpayers to pay what they can to steer clear of penalties and interest. If you turn in your returns more than two months late, you might face a fine of $485 or 100% of the unpaid tax – whichever is lower.
But don’t worry too much just yet; the IRS offers a lifeline. If you’ve been on the ball with your taxes for the last three years, you might score a reduction in penalties. And even if you don’t qualify for that, relief could still be on the table if there’s a legit reason for your late submission.
Remember, interest keeps piling up until your tax bill is settled. The IRS stressed that penalties and interest won’t stop until you’ve paid off the full balance. So, if you miss the April 15 deadline, the interest keeps on ticking.
The IRS suggests paying off as much as you can and looking into different options for settling your dues. If you owe less than $100, you could opt for a 180-day plan. For bigger debts under $50,000, there’s a long-term payment option, allowing you to spread payments over 72 months. If you fall between $25,000 and $50,000, direct debit payments are a must.
And here’s a cool tip – if you start an installment plan, the failure-to-pay penalty will be halved. Also, folks in areas hit by disasters might catch a break with deadline extensions. This relief can also extend to Americans abroad, green card holders outside the U.S., and military personnel serving in certain locations.
One last nugget of wisdom from the IRS – make sure you’re keeping an eye on your tax withholdings to avoid surprises next tax season. Having too little withheld can land you in hot water with an unexpected bill or penalty.