An Extension to File Is Not an Extension to Pay — Contact S.H. Block Today to Resolve Outstanding Liabilities
If you requested an extension to file your taxes last spring, you weren’t alone: the IRS estimates that more than 11 million people applied for an extension to file their taxes in 2017. Yet despite so many taxpayers choosing this option, our team at S.H. Block meets dozens of clients every fall who don’t understand what their approved extension means and how it could lead to additional penalties and interest that increase the overall tax debt.
Keep reading to learn about how these extensions work and what to expect as you prepare for the late-filing deadline on Monday, October 15.
Filing and Paying Your Taxes
If you didn’t file your taxes by the spring deadline and didn’t request an extension, you will not be protected against the failure to file penalty. However, if you did not owe or were due a refund for 2017, that penalty may not apply. Even if you don’t owe or can’t pay what you do owe, filing is most often in your best interest. In most cases, you have three years to file your return before forfeiting your refund.
If you failed to file your taxes on time or apply for an extension and you owe the IRS or the State of Maryland taxes for that year, you’ll likely be stuck with a failure-to-file penalty. This penalty could equal 5% of your total tax bill for each month after the deadline you fail to pay or 25% of what you owe — whichever amount is greater. So, if you owe $10,000 for the previous year’s taxes, you could potentially pay penalties of up to $500 each month, with a maximum penalty of $2,500.
As you can see, these penalties add up quickly. Regardless of how anxious you are about filing, you should file as soon as possible to avoid additional fees and possible damage to your credit score.
Settling Your Balance With the IRS
Unfortunately, even if you requested and received an extension to file your taxes, you don’t get an extension to pay the balance you owe. You are still required to pay before the applicable filing date (usually April 15) to avoid interest and late fees. However, if you can’t pay the full amount right away, you have several options that may help you avoid further interest and penalties.
Before applying for any of these options, which are listed below, please make sure you have the following information on hand:
- Name as it appears on your most recent return
- Address as it appears on your most recent return
- Date of birth
- Social Security number or individual tax ID number
- Filing status
- Transcripts and login information from previous online payment agreement
If your outstanding bill is small enough that you can repay it in full within 120 days, you might consider applying for a full-payment agreement.
If your tax bill is too big to repay within 120 days, an installment agreement might be your best option. While the installment agreement is in effect, you can help limit interest and penalties and focus on paying down the principal.
Offer in Compromise:
If you owe more than $10,000 in taxes, an Offer in Compromise (OIC) could be your most cost-effective solution. However, you’ll need to prove that you meet several qualifications, and the IRS could still file a federal tax lien against your property while the process is ongoing. If you’re considering an OIC, you should contact an experienced tax resolution attorney so they can help you negotiate the best offer possible.
Applying for any of the above options on your own can be difficult, so if you need help, don’t hesitate to contact S.H. Block Tax Services today for additional assistance.
File Your Taxes Before the Extension Deadline With S.H. Block Tax Services
If you received an extension to file your 2017 income taxes with the IRS and the State of Maryland, you now have less than one month to submit your paperwork. And remember, an extension to file is not an extension to pay, so if you were unable to pay what you owed by the original deadline, you likely owe additional penalties and late fees.
To learn more about how you can deal with potential failure-to-file penalties and other related tax liabilities, please contact S.H. Block Tax Services by calling (410) 793-1231 or completing this brief online form. Our tax attorneys and support staff have decades of experience helping Maryland taxpayers resolve their issues, and we offer free, no-risk initial consultations so we can learn more about your unique situation and assess your options at no cost to you.
Internal Revenue Service. (2017, April 25). IRS sees millions of tax returns last days of tax filing season [press release] (IR-2017-89). Retrieved from https://www.irs.gov/newsroom/irs-sees-millions-of-tax-returns-last-days-of-tax-filing-season
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.