Filing an extension? Don’t forget IRS tax payment
April 18 2018 - 9:13AM
The millions of taxpayers who still have not filed a tax return
have an unexpected extra day to file, with the IRS moving the
deadline to April 18 due to IRS system outages on the planned April
17 deadline. Even with the extra day, some of them are not going to
be able to meet the deadline. If they don’t file either a return or
an extension by the April 18 deadline, they’re going to face a
monthly penalty that is 10 times more than the penalty for not
paying their tax bill. Filing an extension and making sure to pay
any tax owed is the best way to avoid adding unnecessary costs to
tax liability.
“There’s still time to avoid all penalties. Pay at least 90
percent of your 2017 tax bill and file an extension by the April 18
deadline and you’re in the clear,” said Kathy Pickering, vice
president of regulatory affairs and executive director of The Tax
Institute at H&R Block. “It may be easier said than done
though. Not only is time a factor, but you have to be able to make
an accurate estimate of your tax liability to make sure you pay at
least 90 percent.”
Filing an extension helps but doesn’t exempt
procrastinators from paying
The monthly penalty for not filing a tax return is 10 times
greater than the penalty for failing to pay. The best way to avoid
this penalty, which could quickly add up to 25 percent to their tax
bill, is to file a completed tax return or apply for an extension.
However, an extension doesn’t apply to any payments due.
The extension to file is not an extension to pay for those
taxpayers who owe the IRS money. Taxpayers must pay at least 90
percent of their 2017 tax bill by April 18 or they will face
late-payment penalties and interest. Still, filing an extension
will save them the larger failure-to-file penalty.
The monthly penalty for not paying in full is 0.5 percent of the
unpaid balance per month with a maximum of 25 percent. The monthly
penalty for not filing a tax return is 5 percent and capped at a
maximum of 25 percent. For example, for someone who owes $1,000,
the failure-to-pay penalty starts at just $5 per month, but the
penalty for failing to file a return starts at $50 per month and
thus maxes out very quickly. If the failure-to-file penalty and the
failure-to-pay penalty both apply in the same month, the maximum
combined penalty that month is 5 percent.
Taxpayers who cannot pay have options if they work with
the IRS
“Time and making accurate estimates aren’t the only obstacles to
avoiding penalties. You also have to have the money available to
make the payment. But if you don’t, a tax professional can help you
understand your payment options to minimize your penalties,” said
Pickering.
If a taxpayer can’t pay their balance due all at once, they may
qualify for one of several tax payment alternatives. For example,
they can request a short-term extension to pay, make an installment
agreement or even pay with a credit card. In some instances, the
taxpayer may qualify for an offer-in-compromise. By working with
the IRS, taxpayers may reduce or eliminate their penalties.
A tax professional can help taxpayers determine the best way to
pay their tax bill in their unique situation, as well as estimate
their tax liability so they can avoid failure-to-pay or
underpayment penalties.
Media contact: Susan Waldron, susan.waldron@hrblock.com, 816-854-5522
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