WASHINGTON
— The Internal Revenue Service reminds taxpayers who owe but can’t pay
in full that several options are available to help them meet their tax obligations
and save money by the April 15 filing deadline.
Taxpayers
should file their return on time, pay as much as they can with their return and
use IRS.gov if they need to request a payment agreement.
Interest
and penalties add up for people who don’t file and pay on time. But taxpayers
can limit these charges by filing on time and paying sooner.
Though
interest, currently at the rate of 6 percent per year and late payment penalties,
normally 0.5 percent (1/2 of 1 percent) per month, apply to any tax paid after
the April 15 deadline, taxpayers can limit these charges by paying sooner. In
addition, by filing on time, a taxpayer avoids the much larger 5-percent-per-month
late-filing penalty. For example, a taxpayer who files on May 1, owing $1,000
in tax, would be charged interest plus a $50 penalty.
Various
e-pay options offer taxpayers the easiest and fastest way to make a full or partial
payment with their return. These options enable taxpayers to make payments either
online or by phone using electronic funds withdrawal or a credit card. Alternatively,
taxpayers can send the IRS a check made out to “United States Treasury.”
Taxpayers
who need more time to pay can find out in just a few minutes whether they qualify
for a payment agreement with the IRS. Just click on the Online Payment Agreement
link and follow the prompts. By entering some basic information about their tax
situation, eligible taxpayers can set up in a matter of minutes either a short-term
payment extension or a monthly payment plan.
A short-term
extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment
penalty plus interest will apply.
A monthly payment plan
or installment agreement gives a taxpayer more time to pay. Though interest still
applies, the late-payment penalty is cut in half for any month an installment
agreement is in effect. This reduced rate of 0.25 percent (1/4 of 1 percent) per
month is only available if the tax return was filed on time.
A
user fee will also be charged if the installment agreement is approved. The fee,
normally $105, is reduced to $52, if taxpayers agree to make their monthly payments
electronically through electronic funds withdrawal. The fee is $43 for eligible
low-and-moderate-income taxpayers.
Alternatively, taxpayers
can apply for a payment agreement by filling out Form 9465, Installment Agreement
Request. This form can be filed along with either an electronically filed return
or a paper return. If filing on paper, be sure to attach it to the front of the
return.
Some taxpayers can wait until after April 15 to
file and pay. As a general rule, those eligible get the extra time penalty-free
and interest-free without having to ask for it. Eligible taxpayers include:
- Members
of the military serving in Iraq, Afghanistan or other combat-zone localities.
Normally, the filing and payment deadline is postponed until 180 days after the
service member leaves the combat zone.
- Disaster-area taxpayers
in four states affected by recent floods, storms and tornadoes. The filing and
payment deadline is postponed until May 6 in parts of Illinois, May 19 in parts
of Georgia and Missouri and May 27 in parts of Arkansas.
