April 15, 2025, tax day, is right around the corner. If you’re unable to file on time or struggling to pay what you owe despite submitting your returns, this guide breaks down the consequences of late filing or payment and offers practical steps to lessen or avoid penalties.
Late Filing and Payment Penalties
If you miss the tax day filing deadline, the IRS won’t automatically penalize you if you have an acceptable reason, including a serious illness or death in your immediate family, an unavoidable absence when the deadline hits, or a disaster like losing your home. Write to the IRS Service Center where you’d file your return before they contact you. Explain your situation clearly, include supporting details, and close with: “Under penalties of perjury, I confirm that this statement and any attachments are true and accurate to the best of my knowledge.”
For late payment, you’ll need to demonstrate that you managed your finances responsibly but still couldn’t cover the tax bill without significant hardship. A financial overview—such as a cash flow statement showing your income and expenses—can help. If an unexpected event disrupted your ability to pay, note that too.
You Can’t Pay in Full
If you can pay part of what you owe when you file, do so. The IRS will send a notice for the remaining balance, adding interest (based on the federal rate) and a late payment penalty of 0.5% per month, up to a 25% cap. Another option is using a credit card, which involves a convenience fee (a percentage of the tax owed) plus the card’s interest rate.
Installment Agreements
The IRS is required to approve an installment plan for individuals owing $10,000 or less in taxes (excluding penalties and interest) if you meet specific conditions: ability to pay it off within three years, no similar plan in the past five years, have filed and paid taxes on time for the last five years, and agree to stay current during the agreement. You can choose a short-term plan (180 days or less) or a longer one (over 180 days).
Monthly Payment Plans
If you prefer not to use the IRS’s online payment system, you can submit Form 9465 to request a monthly installment plan. For amounts between $25,000 and $49,999, payments typically come through direct debit or payroll deductions—note that payroll deductions aren’t available if you file the form electronically. Interest and late payment penalties will continue to accrue during the plan.
Requesting More Time
If paying on time would cause significant hardship, you can request a six-month extension by filing Form 1127 before the payment due date. You’ll need to show that borrowing or selling assets would lead to severe financial loss, supported by a balance sheet and a cash flow statement. An approved extension waives the late payment penalty but not the interest.
Unhappy with the amount you owe on tax day? Partnering with a Federal Retirement Consultant® can help you craft a tailored strategy to reduce your tax burden.
