In case you anticipate being unable to pay your taxes for this tax season, it is essential to still submit a return with that information or request an extension, according to tax professionals. Tom O’Saben, who is the National Association of Tax Professionals' director of tax content and government relations, emphasizes the importance of filing a return even if there's a tax debt. He explains that the IRS is willing to assist taxpayers, but they need to be aware of the situation. Therefore, the primary advice is that owing taxes should not be a reason to avoid filing.
Delaying filing a return or asking for an extension will result in immediate accumulation of interest and penalties. Sharing your circumstances with the IRS promptly can help avoid such costs. It is better to file a return even if you are unable to pay the full outstanding taxes. Not meeting the April 15 deadline to pay all taxes owed will lead to accruing interest, even with an extension to October, but it is more manageable than penalties incurred from not paying at all.
Emily DiVito, a senior advisor at Groundwork Collaborative and former U.S. Treasury advisor, warns against the consequences of not filing taxes, which could result in penalties later. She advises seeking extensions and payment plans as viable options.
If taxes are left unpaid, the IRS can impose interest and penalties, garnish wages, apply a lien on property, or restrict a passport. However, filing an extension or submitting a return with financial information can prevent these repercussions. Even if full payment is not feasible by April 15, making a partial payment upon filing is advisable.
Individuals have access to free resources for managing extensions and payment plans. Volunteer Income Tax Assistance (VITA) sites provide free assistance for filing returns or arranging extensions. Additionally, they can help set up a payment plan of up to 72 months to settle owed taxes. The IRS Direct File program is another free tool available for taxpayers, with the aim of ensuring everyone receives the refunds they are entitled to upon filing taxes.