Can't pay your taxes before IRS deadline? Here's what you need to know
As the April 15th tax deadline approaches, many U.S. taxpayers face the challenge of not being able to pay their taxes on time. Experts emphasize the importance of filing or requesting an extension to avoid further penalties.
The IRS tax season is quickly approaching its deadline, leaving many taxpayers in a stressful situation. As April 15th nears, concerns about meeting the payment deadlines are growing, but there are options available.
For those worried about not being able to pay their taxes on time, experts have some advice on how to proceed. Filing your tax return or requesting an extension could be key steps to avoid additional penalties and interest.
What happens if I don’t pay my taxes?
In addition to accumulating interest and penalties, the IRS could eventually garnish your wages or place a hold on your passport.
However, by requesting an extension or filing your return with your financial information, you can avoid these consequences. Even if you don’t have the full amount to pay by April 15, paying a small portion when filing your return helps.
“The IRS wants to work with you,” said Tom O’Saben, Director of Tax Content and Government Relations at the National Association of Tax Professionals. “But if you’re asking for help from the IRS, they need to know something about you. So, the first thing is to file that return. The main takeaway is that owing money is not a reason not to file the return,” he clarified.
"The worst-case scenario is that you don’t file the return and end up facing penalties later on," said Emily DiVito, Senior Policy Advisor at the Groundwork Collaborative and former advisor at the U.S. Treasury. "That’s not good for anyone. But there are opportunities to request extensions and set up payment plans," she explained.
Are there free tools to help manage an extension request or set up a payment plan?
Yes. The IRS Volunteer Income Tax Assistance (VITA) sites across the country have volunteers who can assist you with filing a return or requesting an extension free of charge. These volunteers can also help set up a payment plan of up to 72 months to pay any owed taxes. The IRS Direct File program is also free.
"Although the question mark when you click to pay can be intimidating, we want to ensure that taxpayers receive the money they’re owed," said DiVito.
"Most taxpayers—certainly most working taxpayers—get a refund. But because of how many tax credits work, you only get that refund if you file your tax return first," she added.
Are there other options if I can’t pay the IRS?
If you’ve experienced unusual difficulties and share your situation with the IRS, sometimes the tax service can place your account in "currently not collectible" status. To qualify, you must share information about your income and daily expenses, and the IRS will determine if you meet the criteria.
“Let’s say you’ve been sick, lost your job because of illness, and have considerable medical bills to pay. You’ve had a rough time, things happened outside your control, and you need a break,” explained O’Saben. "In that case, the IRS can put you in 'currently not collectible' status. But all of this requires communication and dialogue. No one wants to admit financial problems, but the IRS will work with you if you do."
If you don’t file a return or request an extension, interest and penalties will start accumulating immediately. These costs are largely avoidable if you share your situation with the IRS in a timely manner. Filing a return without paying the full amount owed is better than not filing at all.
It’s important to understand that if you don’t pay all your taxes before the April 15 deadline, interest will accumulate even if an extension is granted until October. However, that interest will be more manageable than the charges that accumulate when you don’t pay taxes at all.
There are also rare circumstances in which the IRS will settle your tax debt for less than the amount owed. This is called an "offer in compromise." VITA tax professionals can help you determine if you qualify, and you can also check using a free online tool from the IRS.
I didn’t file my taxes last year. What now?
That’s okay. Start now.
“I’ve been in the tax field for over 35 years,” said O’Saben. "The number one reason people don’t file their tax returns is that they feel they might owe—though that may be incorrect—and they don’t want to face it. But it’s not a problem that will go away. So, tell the IRS the truth about your situation. And they’ll work with you."
Miklos Ringbauer, a public accountant and tax professional in California, agreed. "It’s perfectly understandable," he noted. "The IRS deals with each taxpayer. They’ve handled these situations before. There’s nothing they haven’t seen," he added.