The calendar has already turned to April, and the deadline for filing your tax return for 2011 is fast approaching. While some may have already filed and received a refund, others may be delaying filing because they will owe money with their return. Some may even be in a position where they cannot afford to pay all of their tax debt with their return.
This is no small problem, because failing to pay taxes on time can subject a person to stiff tax penalties and interest. The Internal Revenue Service, however, has offered some tax tips to those who are facing this dilemma:
• Avoid procrastination. Failing to address a tax problem only makes matters worse, so the IRS recommends that taxpayers meet the filing deadline and pay as much of their debt as they can afford. By doing so, a taxpayer can diminish penalties and interest.
• Certain taxpayers, however, may be eligible to pay their taxes at a later date and avoid a penalty for late payment. But extensions are not available to everybody, and taxpayers must apply using Form 1127-A and submit it before April 17.
• For those who cannot pay the debt at once, the IRS allows tax debts to be paid off over time through installment agreements. Taxpayers must meet certain criteria before becoming eligible for an installment agreement.
While installment agreements can be beneficial for some taxpayers, they do have fees and other consequences. In addition, the rules related to filing, penalties and interest can be complex. Depending on the facts and circumstances of their cases, taxpayers may have additional options to deal with their tax debt.
Source: Internal Revenue Service, "Tips for Taxpayers Who Can't Pay Their Taxes on Time," IRS Tax Tip 2012-64, April 3, 2012.