Should I still file taxes if I can’t pay on time? Yes, IRS says. Here’s what to know

The end of tax season is quickly approaching, and officials are urging taxpayers to file and pay their taxes on time to avoid penalty fees.

Taxpayers have until April 18 to submit their tax return and make any payments to the Internal Revenue Service, otherwise they are at risk of facing penalties and interest for missing payments, according to the IRS.

Even taxpayers who cannot pay the full amount they owe by April 18 should file their taxes on time, the IRS said in a March 9 news release. Failure to do so can result in even more costs.

Here’s what to know if you are worried about filing or paying your taxes this year.

What to do if you cannot pay your taxes

The IRS offers a variety of payment options for taxpayers who cannot pay their taxes in full by the April 18 deadline.

Here are some options the IRS offers:

• Short-term payment plans: The IRS offers some taxpayers the option to take additional time — up to 180 days — to pay their taxes. There is no fee, but interest and penalties will accrue until the full payment is completed.

• Monthly payment plans: If 180 days is not long enough, some taxpayers might qualify for a monthly payment plan. There are various options for these plans depending on your income and how you choose to make your payments.

• Offer in compromise: This is an agreement between a taxpayer and the IRS that resolves liability by paying “an agreed upon reduced amount.”

• Temporarily delay collection: If paying your taxes prevents you from covering basic living expenses, you can ask the IRS to delay collection until you are able to pay. This does not resolve the debt, but it means that the payment will be deferred and will accrue penalties until the original amount is paid.

Before the IRS will consider any of these requests, you must file all tax returns.

To check your eligibility for payment plans or delayed collection, you should call 800-829-1040. You can also use this application to request a payment plan. To see if you qualify for an offer in compromise, you can use this pre-qualifier tool.

Failure to file comes with costly penalties

Taxpayers who do not file and pay their taxes by the April 18 deadline are at risk of being charged with failure to file and failure to pay penalties.

Returns that are more than 60 days late face either a minimum penalty of $435 or “100% of the tax required to be shown on the return” — whichever payment is less, according to the IRS.

Penalty charges are based on how late your tax return is filed and how much of your payment goes unresolved, the IRS said. Unpaid tax is considered the tax shown on your return minus any amount paid through withholding, estimated tax payments and refundable credits.

Failure to file penalties are calculated as 5% of unpaid taxes for each month that a tax return is late. The charge maxes out at 25% of your unpaid taxes. If you are facing both failure to file and failure to pay penalties in the same month, you will be charged a combined penalty of 5% for each month that your return was late.

If you still have not filed or paid your taxes after five months of penalties, the failure to file charges will max out, but you will continue to accrue failure to pay penalties up to 25% of the unpaid amount.

Penalties also accumulate interest that increases until your balance is paid in full.

How to know if you qualify for an extension

Some taxpayers might qualify for an extension on filing their taxes. Here’s how to know if you qualify or can qualify.

• Natural disaster areas: Several regions that experienced natural disasters will automatically receive an extension until Oct. 16 to file their taxes. You can check this page to determine if you qualify for a natural disaster extension.

• Other taxpayers: Other individuals, regardless of their income, can also be eligible for an extension to file until Oct. 16. If you are interested in getting an extension to file your taxes, you should file that extension by April 18. An extension on filing does not give you an extension of time to pay the taxes you owe, though, so you should still be prepared to pay any owed taxes by April 18. You can visit this page to file for an extension.

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