Filing an extension? Don’t forget IRS tax payment

April 15, 2019 : Annelise Wiens

Some of the people who still have not filed a tax return are going to be able to meet the April 15 tax filing deadline. If they don’t file either a return or an extension to file by the April 15 deadline, they’ll face a monthly penalty that is 10 times more than the penalty for not paying their tax bill. Filing an extension and making sure to pay any tax owed is the best way to avoid adding costs to tax liability.

“There’s still time to avoid all penalties: pay at least 90 percent of your 2018 tax bill and file an extension by the April 15 deadline and you’re in the clear,” said Kathy Pickering, vice president of regulatory affairs and executive director of The Tax Institute at H&R Block. “It may be easier said than done though. Not only is time a factor, but you have to be able to make an accurate estimate of your tax liability to make sure you pay at least 90 percent.”

Filing an extension helps but doesn’t exempt procrastinators from paying

The monthly penalty for not filing a tax return is 10 times greater than the penalty for failing to pay. The best way to avoid this penalty, which could quickly add up to 25 percent to their tax bill, is to file a completed tax return or apply for an extension. However, an extension doesn’t apply to any payments due.

The extension to file is not an extension to pay for those taxpayers who owe the IRS money. Taxpayers must pay at least 90 percent of their 2018 tax bill by April 15 or they will face late-payment penalties and interest. Still, filing an extension will save them the larger failure-to-file penalty.

The monthly penalty for not paying in full is 0.5 percent of the unpaid balance per month with a maximum of 25 percent. The monthly penalty for not filing a tax return is 5 percent and capped at a maximum of 25 percent. For example, for someone who owes $1,000, the failure-to-pay penalty starts at just $5 per month, but the penalty for failing to file a return starts at $50 per month and thus maxes out very quickly. If the failure-to-file penalty and the failure-to-pay penalty both apply in the same month, the maximum combined penalty that month is 5 percent.

Taxpayers who cannot pay have options if they work with the IRS

“Time and making accurate estimates aren’t the only obstacles to avoiding penalties. You also must have the money available to make the payment. But if you don’t, a tax professional can help you understand your payment options to minimize your penalties,” Pickering said.

By working with the IRS, taxpayers may reduce or eliminate their penalties. If a taxpayer can’t pay their balance due all at once, they may qualify for one of several tax payment alternatives. For example, they can request a short-term extension to pay, make an installment agreement or even pay with a credit card. In some instances, the taxpayer may qualify for an offer-in-compromise.

A tax professional can help taxpayers determine the best way to pay their tax bill in their unique situation, as well as estimate their 2018 or 2019 tax liability so they can avoid failure-to-pay or underpayment penalties.

Related Resources

Annelise Wiens

Former Editor and Producer

As the former newsroom editor, Annelise Wiens was interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Mo. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a bachelor's degree in history.

Connect with us