How To Pay Your Tax Bill On Time To Avoid Late Charges And Interest

• The deadline to pay any individual income tax you owe is April 18, 2022.
• Not filing and paying on time  will result in a 5% penalty per month on any unpaid tax. After 60 days, the penalty may increase.
• If you miss the filing deadline and don’t owe any tax, your refund will be withheld for up to three years until you file.
• This article was reviewed for accuracy and clarity by Luis Rosa, an expert on Personal Finance Insider’s tax review board.
• See Personal Finance Insider’s picks for the best tax software »

There’s still plenty of time to file your taxes before the April 18 deadline. 

But if you don’t think you’ll be able to gather all the necessary documents, prepare, and submit your federal income tax return on time, make sure to file for an extension with the IRS.

A tax extension will push your filing due date back six months to October 17, but you’re still expected to calculate and pay any tax you owe by April 18, or set up a payment plan with the IRS.

If April 18 comes and goes and the IRS hasn’t heard from you at all, you can expect to face a penalty.

What is the penalty for filing taxes late?

There are two separate penalties that could apply to your tax bill if you miss the April tax deadline. There’s one late charge for not paying what you owe the IRS and there’s another late charge for not filing a return to report what you owe. If you don’t do either, the charges can add up.

Let’s say that you file a tax return and it shows you owe a balance of $500, but you don’t send a payment to the IRS by April 18. That will result in a Failure to Pay penalty of 0.5% of the unpaid tax balance — in this case, $2.50 — for each month or part of a month the tax is unpaid. The maximum penalty is 25% of your unpaid taxes.

If you don’t file a tax return at all, the IRS will calculate whether you owe money. If you do, the IRS will charge a Failure to File penalty of 5% of the unpaid taxes for each month or part of the month that the balance remains unpaid. Since the Failure to Pay penalty also applies, you owe 5% of the unpaid tax for each month or part of the month until you file.

When your return is filed more than 60 days after the due date, it’s subject to a minimum penalty equal to the lesser of 100% of the tax required to be paid on your return or $435, according to current IRS rules. There will also be interest accruing on your balance equal to the federal short term rate plus 3%, compounding daily.

What if I can’t pay my tax bill?

If you can’t afford to pay your tax bill in full on the deadline, don’t pull out your credit card or ignore the situation.

The IRS offers reasonable payment plans at much lower interest rates than most banks. You may even be able to settle the bill for less than you owe, called an offer in compromise, or request a deferment until you can make a payment. Offers in compromise and requests for deferment require additional paperwork and must be approved by the IRS.

Do I have to file taxes?

Not everyone has to file taxes. If you made more than the standard deduction for your age and filing status, claimed unemployment income, or were self-employed and earned at least $400 during the year, you must file a tax return with the IRS. Some dependents may be required to file as well.  

Here are the standard deduction amounts for 2021 and 2022:

Those with a zero or negative tax bill aren’t required to file, unless they want to claim refundable credits, such as the earned income tax credit (EITC), the child tax credit (CTC), or the recovery rebate credit (commonly known as a stimulus payment), or had tax withheld by their employer throughout the year and want to get a refund.

If you didn’t pay the amount of income taxes you were supposed to throughout 2021, you may owe the IRS on the April 18 tax deadline. You can use tax software or consult a tax professional to calculate your bill. 

It’s important to report what you owe, if anything, when you file your tax return and pay it — or pay as much as you can — by the deadline.

If you file but don’t pay, you are charged 0.5% of the unpaid tax each month, plus interest. If you don’t file or pay, you are charged up to 5% of the unpaid tax each month, plus interest. The penalties can really snowball on a big bill. 

Reach out to the IRS as soon as possible if you can’t afford to pay your bill. You might be able to set up a payment plan.