Monday, May 17 is the new deadline for filing your taxes or an extension with the Internal Revenue Service. The deadline was moved to May from April due to the coronavirus pandemic.
The Internal Revenue Service (IRS) reminds taxpayers who owe 2020 taxes that there are different ways to pay through IRS.gov, including payment options for many people who can’t pay in full.
According to the IRS, the most important thing everyone with a tax bill should do is file a return by the May 17 due date, even if they can’t pay in full, or request a six-month extension to avoid higher penalties for failing to file on time. Though automatic tax-filing extensions are available to anyone who wants one, these extensions don’t change the payment deadline. It is not an extension to pay.
Usually anyone who owes tax and waits until after that date to file will be charged a late-filing penalty of 5% per month. So, if a tax return is done, filing it by May 17 is always less costly, even if the full amount due can’t be paid on time.
Free File is an easy, quick way to file that is available to anyone who makes $72,000 or less and is available on IRS.gov.
Making a payment, even a partial payment, will help limit penalty and interest charges. Most individual taxpayers qualify to set up an online payment agreement with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved.
There are two main types of Online payment plans. They are:
- Short-term payment plan – The payment period is 120 days or less and the total amount owed is less than $100,000 in combined tax, penalties and interest. A 180-day payment plan is also possible, but it’s only available by calling or writing the IRS. Either way, there’s no fee for setting one up, though interest and the late-payment penalty continue to apply.
- Long-term payment plan – The payment period is longer than the short-term payment plan. Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a setup fee normally applies. But low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.
The fastest and easiest way to pay a personal tax bill is with Direct Pay, available only on IRS.gov.
Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments.
For some, but not all, struggling taxpayers, three other options are available:
Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. Taxpayers can request a delay by calling the phone number on their notice or 800-829-1040.
Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has filed and paid on time during the past three years, the IRS can typically provide relief under the First Time Abatement program. Visit IRS.gov/penaltyrelief for details.
Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise. Though there is typically a $205 non-refundable application fee, it is generally waived for low-income taxpayers, and for offers based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for anyone interested in applying.
Taxpayers can securely access their federal tax account information at IRS.gov/account. Among other things, this includes viewing any amount due and payment history.