With April 17 approaching, there will be some taxpayers who will be unable to pay their income taxes on time. Such taxpayers should nonetheless timely file their tax returns - the IRS imposes separate penalties for late filing and late payment so by filing (even though not paying), the late filing penalty is avoided.
The late payment penalty is 0.5% of the net tax tax due (reduced for credits for withheld taxes and estimated taxes) for each month that the payment is late, up to a 25% maximum. Of course, interest also applies to the unpaid taxes.
Here are some ideas to avoid the penalties (and interest, if the tax can be paid):
a. Borrow the tax payment from friends or family.
b. Bank loans (including home equity loans).
c. Credit card payment (where allowable by the credit card issuer). However, these providers charge a 2.49% fee, plus their usual interest.
d. Request an installment payment agreement from the IRS (using Form 9465). There is a $43 fee for these agreements. Interest is still charged on the unpaid tax, but the late payment penalty is reduced by 50% if the return is filed by the due date (including extensions).
e. Possible qualification for a 120 day extension to pay, or a payroll deduction installment agreement with the IRS.
The late payment penalty is 0.5% of the net tax tax due (reduced for credits for withheld taxes and estimated taxes) for each month that the payment is late, up to a 25% maximum. Of course, interest also applies to the unpaid taxes.
Here are some ideas to avoid the penalties (and interest, if the tax can be paid):
a. Borrow the tax payment from friends or family.
b. Bank loans (including home equity loans).
c. Credit card payment (where allowable by the credit card issuer). However, these providers charge a 2.49% fee, plus their usual interest.
d. Request an installment payment agreement from the IRS (using Form 9465). There is a $43 fee for these agreements. Interest is still charged on the unpaid tax, but the late payment penalty is reduced by 50% if the return is filed by the due date (including extensions).
e. Possible qualification for a 120 day extension to pay, or a payroll deduction installment agreement with the IRS.
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