Tax Penalties!
Interest and Penalties Start Immediately
If you don’t pay your tax bill in full by Tax Day (tax filing due date), the IRS will charge interest on the outstanding amount.
Additionally, you may face a late-payment penalty (sometimes called a “failure-to-pay penalty”) of 0.5% per month, with a maximum penalty of 25% of your unpaid taxes.
Notices Start to Arrive Within 1-3 Months
After missing the payment deadline, you’ll receive letters from the IRS notifying you that a balance is due.
These notices may continue for several months.
However, if you can prove a reasonable cause for paying late or if it’s your first offense, you might be able to get the penalty reduced or removed.
Tax Liens and Collections Calls May Follow
If you take no action to respond to the notices or make a payment, the IRS may escalate its collection tactics.
A tax lien is a legal claim against property and financial assets you own or may have coming to you.
Collections calls may also become more frequent.
Payment Plans: Solution
If you’re unable to pay the full amount due, consider setting up a payment plan with the IRS.
Here are your options:
- Short-term payment plan: For taxpayers with a total balance less than $100,000 in combined tax, penalties, and interest.
This plan gives you an extra 180 days to pay the balance in full. - Long-term payment plan (installment agreement): For taxpayers with a total balance less than $50,000 in combined tax, penalties, and interest.
You can make monthly payments for up to 72 months. Consider using direct debit to simplify payments and reduce the chance of default.
