The Tax Day deadline for 2023 income taxes is quickly approaching on April 15. If you are expecting a refund, there are no penalties for filing late, but you may lose out on interest and spending power. It is important to file your taxes on time to receive your refund sooner. If you miss the deadline and owe taxes, you may incur late filing penalties, late payment penalties, and interest on the amount owed. Filing an extension past the deadline is not allowed, but filing an extension by the deadline gives you an extra six months to complete your tax return and pay any remaining tax liability by October 15, 2024.
The fees and penalties for filing taxes late include a failure-to-file penalty, a failure-to-pay penalty, and interest on the amount owed. The failure-to-file penalty is generally 5% of the amount owed for each month your return is late, while the failure-to-pay penalty is usually calculated at 0.5% of any taxes owed that aren’t paid by the deadline. The IRS also charges interest on late taxes, currently at a rate of 7%. If you need more time to file your taxes, you can file an extension by the April 15 deadline, which gives you an extra six months to complete your return and pay any remaining tax liability without incurring fines or penalties.
If you can’t afford to pay the taxes you owe, you have options to lighten your financial burden. You can apply for an IRS payment plan, which can allow you to pay off your tax debt within 180 days with no cost, although penalties and interest will continue to accrue until the debt is paid off. If you need more than 180 days, you can apply for a long-term payment plan with a fee for automatic monthly bank payments. Low-income taxpayers may qualify for waived fees or reduced fees for payment plans. Other borrowing options outside of the IRS include using a credit card with a 0% intro APR or a debt consolidation loan to pay off larger tax debts. It is important to explore all options available to you to manage your tax debt effectively.
