Paying out taxes is something that all of us have to do, and it can be incredibly important to ensure that you pay on time. While the majority of us are able to do so, some of us might, unfortunately, be late without IRS payments. This can end up having quite a significant amount of repercussions for someone. This is especially true if you leave off paying your taxes for a considerable amount of time.
What To Do If You’re Late With An IRS Payment
While there are several things that you can do should you be late filing and paying your taxes, the first thing you should do is file and pay as soon as you’re able. Having said that, there’s also the IRS Fresh Start program, which many people may not be aware of. Because of that, not many of the people who are eligible for the program have taken advantage of it in the past.
The IRS began the Fresh Start program to help those of us who may have difficulty paying our taxes on time for financial reasons. Furthermore, it’s mainly focused on people who may be placed under a significant amount of financial strain because of the fees and interest that are charged on late filings. With that in mind, it can be seen as a form of debt relief with the focus being on tax debts. However, it should be noted that there are a number of eligibility requirements to qualify for the program. These include:
- Correcting tax withholdings;
- Filing any missing tax returns; and
- Making all estimated tax payments and federal tax deposits.
In terms of being able to use this initiative, instead of applying for the IRS Fresh Start, you’ll have to apply to one of the many programs under its umbrella. These programs typically include penalty abatement, installment agreement, offer in compromise or lien withdrawal. However, while each has the basic eligibility requirements we mentioned above, some of them may have a few more essentials. Furthermore, you’ll then need to file the appropriate forms and pay any application fees. However, it should be noted that those earning below a certain threshold may be able to waive this fee. You’ll need appropriate documentation to prove as such. On top of this, you may need a significant amount of other documents, although this can change depending on the program.
What Happens If You Pay The IRS Late
Should you be late paying your taxes, there are a number of things that may happen. Perhaps the most notable of these is that you may be charged two penalties on top of the taxes you owe, depending on your situation. The first of these is a late filing fee, which is typically only applied if you file your taxes more than 60 days late. This will be a minimum of $210 but may become larger the longer you owe your taxes. Should you owe less than this, then the fee will be the equivalent of how much you owe.
Secondly, you may also be charged a late payment fee, which is separate from a late filing fee. This payment is typically 0.5% of the tax you owe per month, and it will keep growing until your taxes are paid. However, this will eventually stop adding up when it reaches 25% of the taxes you owe. With that in mind, paying your taxes on time can end up saving you a considerable about of money.
That being said, should you realize that you may be late with your taxes, then you should contact the IRS as soon as possible. You should then be able to follow one of the processes we’ve outlined above to help minimize these fees. The primary reason for this is that it can result in a significant drop in the fees and interest that you’ll have to pay, with the IRS noting that you may only have to pay half of the fees that others may have to pay. However, this only applies from when you begin working with them to figure out a payment plan. As such, it can be in your best interest to contact them as early as possible.