The Internal Revenue Service (IRS) issued a crucial reminder to taxpayers who missed the April deadline that they could face severe penalties if they do not meet their obligations.
However, the agency added that there are options available to pay what they owe to the government. According to tax laws, the agency noted that late tax payments could incur an interest of 8 percent on the owed amount, which accumulates daily.
Furthermore, there will also be a 5 percent penalty per month for unjustified late tax filings, and late payment would incur a 0.5 percent fee, reaching a maximum of 25 percent.
Don’t Be Late With the IRS
“The IRS reminded people that paying what they can as soon as possible will limit the penalties and interest, which can quickly grow according to tax laws,” the tax agency said in a statement on its website on Monday.
The agency added that returns filed more than two months late will receive a penalty of $485 or 100 percent of the failed tax payment, “whichever is less,” the agency added. However, taxpayers can obtain some relief
“Taxpayers who have filed and paid on time and have not received any penalties in the past three years often qualify for a penalty reduction,” the IRS said in its statement. “A taxpayer who does not qualify for this relief may still qualify for penalty relief if their failure to file or pay on time was due to a reasonable cause and not intentional neglect.”
But the interest that accumulates as a result of the failed tax return is not eliminated unless the owed amount is paid.
“In addition to penalties, interest will be charged on any unpaid tax before the April 15 due date and any penalties imposed,” the tax agency commented. “Interest stops accumulating as soon as the owed balance is paid in full. The law does not allow for interest reduction based on reasonable cause or first-time penalty relief.”
The IRS urged taxpayers to pay what they can and explore options for the amounts that are pending.
Late Tax Payments Could Cost You Big Time
There are some short-term payment plans if the amount owed is less than $100,000, where those taxpayers would have 180 days to settle their debt with the government.
Long-term payment applies to those who owe less than $50,000, who could choose to make monthly payments over a period of 72 months. Direct debit payments are mandatory for those who owe between $25,000 and $50,000, the IRS indicated.
“Although interest and late payment penalties continue to accumulate on unpaid taxes after April 15, the failure-to-pay penalty is reduced by half while an installment agreement is in effect,” the agency explained.
The agency provides some relief to residents of areas affected by natural disasters, which includes an extension of the deadline to file those taxes. Others who can apply for relief are U.S. citizens abroad, permanent residents living outside the country, and military personnel serving outside the United States and Puerto Rico.
