Paying Your Taxes Late? This Is What Could Happen
It’s been a couple of days since the IRS tax filing date was due, which means that, if you forgot or didn’t have time to pay your taxes, you must start thinking about the consequences you might be facing. We should remind you that the longer you wait, the more severe the penalties will be, so try to find the time to pay your taxes to avoid a situation that will not be favorable for you. These are some of the consequences you might be facing if you didn’t pay your taxes on time.
The very first aspect we must keep in mind is that, if we didn’t pay our taxes by the April due date, which was last Monday, we will be subject to interests and late fees. The IRS charges a failure-to-pay penalty that consists of 0.5 percent of your total balance per month. The maximum percentage that they can charge, though, is 25% of the total balance you owe. This is why it is important to cover our taxes due as soon as we have a chance.
Besides the late payment penalties we will be subject to, we will also have to pay for interests. Interests are charged based on the federal short-term rate, plus 3 additional percentage points. We should remember that these are daily compounded interests, which begin on the day our tax payment was due. This means that your balance will increase rather quickly, so we should make sure we delay our payment the least time possible, or we will be subject to a much higher balance.
For those who requested an extension, even when it might have been granted, such an extension doesn’t apply to our balance due. This extension only applies for submitting our income tax report, but if we are expecting to have a balance owed, we need to cover such balance by the April due date. In order to do so, we must fill out Form 4868 so we can pay an estimated amount. The advantage of doing so is that we don’t have to cover the full balance, and if we cover at least 90% of our due balance, we might be able to avoid the failure-to-pay penalty, which does give us extra time to pay the full amount.
If we are going through financial hardship, the best way to go is to request a payment installment agreement with the IRS instead of simply failing to pay our balance. Besides the extra time and the convenience installment agreements provide, this also reduces the interests we pay, and the rate drops from 0.5% to 0.25% per month. This way, we will make sure we’re minimizing the penalties we are having to cover while still being able to pay out our balance, keeping us safe from much tougher situations, like having our property and bank accounts seized by the IRS.