What Should You Do if You Will Owe Income Tax When You File?


Owe-IRS-MoneyIf you expect to owe the IRS and/or the state tax department you should file your tax returns as soon as possible.  However, you do not have to pay until the tax filing deadline, which for calendar year taxpayers for the IRS is April 15th (may be different for some states).  You can pay on or before April 15th, either online at www.irs.gov/e-pay or by phone at 888-729-1040 with a credit card, debit card or direct bank transfer from your bank account.  You can also pay by completing and mailing IRS Form 1040-V (Voucher) with your check or money order.  Your state may also provide options to make tax payments after you file your return by the filing deadline.

Important:  Although you can obtain an automatic extension of time to file your federal (and possibly state) tax return, you cannot extend the time to pay any taxes you may owe.  Failure to pay your taxes by your tax filing due date will result in stiff penalties plus interest charges.

Installment Agreements:  If you cannot pay everything you owe to the IRS, you can request an installment payment arrangement.  The IRS charges the following fees for setting up an installment agreement:  $52 for a direct debit agreement, $102 for a standard agreement or payroll deduction agreement or $43 if your income is below a certain level.  You may submit Form 9465 Installment Agreement Request indicating your proposed installment payments.  The IRS will notify you within 30 days if your proposal is accepted.  The installment plan will not prevent penalties and interest from accruing.  Therefore, you should arrange to pay what you owe as quickly as possible.  Your state taxation department may also provide options for you to arrange an installment payment plan.

If you do not expect to owe tax to the IRS and you cannot file your return(s) by the filing deadline, you can apply for an automatic 6 month extension to file and there will be no penalties for late filing.  Your state taxation department may also provide for an automatic extension.

IRS Penalties and Interest charges are described at the following website link: