Reasons for Requesting an Extension
There are two major reasons taxpayers request a six-month extension to file their tax returns:
• They waited until the last minute, and now they don’t have enough time to file their return.
• They can’t afford to pay their tax bill.
While the IRS will give all taxpayers an automatic six-month extension to file, they won’t give you an extension to pay your taxes. Even if you get an extension, you could have to pay late filing penalties and interest.
Benefits of Getting an Extension
A filing extension can help reduce the penalties you owe because you won’t be hit with the failure-to-file penalty. This penalty is 5 percent of your unpaid taxes per month.
You’ll still get the failure-to-pay penalty. But at only 0.5 percent per month, this penalty is much less taxing.
When you request your filing extension, you have the option of submitting a payment to the IRS. You’ll have to estimate how much you owe. You could reduce your penalties and interest by sending a partial payment at this time.
How to Reduce Tax Penalties
If you adjust your withholding or estimated tax payments, it will be easier to avoid tax penalties. You’ll be submitting your tax money throughout the year, so you won’t have to face a huge tax bill in April.
If you still end up owing taxes, your tax liability should at least be smaller. That means you’ll owe less in penalties and interest.
Even if you can’t pay, file your return by tax day or request a six-month extension. This allows you to avoid the dreaded failure-to-file penalty.
Lastly, send a partial payment by the return due date. Pay as much as you can, and you’ll reduce your failure-to-pay penalties and interest payments.
Get Help With Delinquent Tax Debt
You may be able to request penalty abatement to reduce the amount you owe to the IRS. You can then request an IRS payment plan to pay off the remaining balance. Consult with a tax attorney to get a better understanding of your options for paying off your tax debt.
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