Being an investor means not only keeping an eye on your investments but also managing your personal finances effectively. One critical aspect of personal finance is managing your taxes, especially when you find yourself unable to pay your tax bill on time.
The tax extension deadline has passed, but if you still can’t pay your balance, there are options available. Approximately 19 million U.S. taxpayers requested an extension by the April 15 deadline, pushing the filing due date to October 15. However, natural disasters can grant additional time, with new deadlines ranging from November 1 to as late as May 1, 2025, depending on location. Despite these extensions, penalties and interest on unpaid balances started accruing after the initial April 15 deadline.
Many taxpayers mistakenly assume that a tax extension provides more time to pay, which is not the case. If you missed the tax deadline, you could face a late payment penalty of 0.5% of your unpaid balance per month or partial month, capped at 25%, in addition to interest on unpaid taxes. In comparison, the failure-to-file penalty is 5% of unpaid taxes per month, up to 25%.
If you find yourself in a situation where you cannot pay your taxes, the IRS offers various payment options. Establishing a payment plan with the IRS is straightforward if you are current on your filing requirements. Online payment plans, known as installment agreements, are available for those who owe less than $50,000, including tax, penalties, and interest. These plans include a short-term option allowing up to 180 days to pay in full and a long-term option with up to 72 months to pay off the balance.
Communication with the IRS is crucial if you have unpaid taxes. Ignoring the issue will not make it go away, and the agency is often willing to work with taxpayers to find a solution. Remember, future tax refunds could be used to offset unpaid balances when on an IRS payment plan, so it’s essential to stay in touch with the agency.
At Extreme Investor Network, we understand the importance of managing your personal finances effectively, including handling your taxes. Our goal is to provide you with valuable insights and resources to help you navigate the world of personal finance. Stay tuned for more tips and strategies to optimize your financial well-being.