Avoid Heavy Penalties: Remedies for Taxpayers Who Can't Meet the April 15 Payment Deadline

Facing the Tax Payment Deadline Without Funds? Here's What to Do

Many find the April 15 tax payment deadline daunting. There exists an opportunity to reduce penalties. This is for individuals who have not yet filed their 2023 tax returns and applies to those who owe income tax payments. Action is necessary for most taxpayers. The cutoff is 11:59 pm on Monday, April 15. Variations exist in Maine, Massachusetts, and Washington, DC, where individuals receive a brief extension due to local holidays. Further relief is provided to those in federally declared disaster areas and businesses and persons affected by the October 7 terrorist attacks in Israel. These groups benefit from extended deadlines for both filing and payment.

What Happens If You Miss the Deadline?

Failure to file before the due date triggers severe financial repercussions. A failure-to-file penalty is 5% of unpaid monthly taxes, capping 25% of the owed amount. Unsettled balances incur a monthly failure-to-pay penalty of 0.5%, maxing out at 25%. For instances where both penalties are applicable in the same month, the combined charge does not exceed 5%. Interest on the outstanding amount exacerbates the financial strain over time. The deadline brings this urgency to the forefront, urging taxpayers to at least make a partial payment to lessen eventual penalties and interest.

Can Filing Form 4868 Save You?

There's an escape hatch for those unable to finalize their tax return by April 15. Submitting Form 4868 secures a vital six-month extension for filing. However, this extension does not apply to payment obligations; due taxes remain payable by the initial deadline. To navigate this, taxpayers should attempt a payment estimated from the previous year's return and account for any changes in 2023. Those unsure can apply a simple calculation for a rough estimate. Multiplying 2023 income by 20%, or 30% for incomes above $200,000, guides towards a safety net amount designed to shield from penalties.

Remedies for Managing Overdue Tax Payments

Dealing with overdue taxes head-on minimizes the accumulation of penalties and interest. Taking steps towards a partial payment significantly impacts the overall financial repercussions. Exploring repayment plans with the IRS may provide a tailored solution, potentially reducing penalty and interest liability. Professional advice from enrolled agents, certified public accountants, or tax attorneys can be invaluable. They offer representation before the IRS, ensuring an optimal repayment strategy is selected.

ALSO READ: IRS Rolls Out Over $900 New Tax Refund for Eligible Americans, Filing Deadline Set to Expire in May

Particular Attention to Freelancers and Gig Workers

Freelancers, gig workers, and sole proprietors face underpayment penalties if they haven't paid estimated taxes quarterly or if their payments fell short. This penalty may still apply despite on-time filing and settlement of owed amounts by April 15, underscoring the importance of regular tax contributions throughout the year. Conversely, missing the filing deadline doesn't attract penalties for taxpayers expecting refunds. Taxpayers in this bracket can file up to three years past the original due date to claim a refund and accruing interest. Beyond this period, entitlement to the refund ceases.

Wrapping Up

Navigating tax payments demands strategic action, especially when deadlines loom and funds are low. Understanding penalties, leveraging filing extensions, and making informed payment decisions can substantially mitigate the financial burden. For individuals and businesses grappling with these challenges, the impending April 15 deadline underscores the urgency of addressing tax obligations promptly.

RELATED TOPIC: IRS Announces $1 Billion Unclaimed 2020 Tax Refunds, Urges Taxpayers to Submit Tax Returns As Deadline Looms

Tags

Avoid Heavy Penalties, Remedies for Taxpayers, Who Can't Meet the April 15 Payment Deadline

© 2023 Lawyer Herald All rights reserved. Do not reproduce without permission.