Taxation & Estate Planning

ASSISTANCE FOR THOSE WHO CAN'T PAY THEIR TAXES IN FULL BY APRIL 15

By Charles Rubin

As previously discussed, taxpayers should endeavor to file their income tax returns by April 15, even if they cannot fully pay their taxes on time, so as to avoid the late filing penalty. The late payments will still be subject to interest (presently at 6% per year) and the late payment penalty of 1/2 of 1% per month.

Taxpayers who need additional time to pay may qualify for a payment agreement with the IRS. The IRS has made this easy through an online process through their website at www.irs.gov. If eligible, a taxpayer can get a short-term extension with up to 120 days to pay, or a monthly payment plan.

The short term extension is still subject to late payment penalties and interest, but no fee is charged for it. A monthly payment plan will cut the late payment penalties in half, but a fee of $43 to $105 is charged.

A payment agreement can also be requested by filing Form 9465 with the filed income tax return.

Note that a few taxpayers may make late payments without interest or penalties without asking for permission. These include members of the military serving in combat-zone localities and taxpayers in certain designated disaster area (but note that specific extended deadlines for payment still apply).

Full post as published by Rubin on Tax on April 13, 2008 (boomark / email).