It is officially Tax Day and many people are finding themselves racing against the clock to meet the deadline.
Fortunately, there's a way to secure extra time and avoid costly penalties by requesting an extension from the Internal Revenue Service.
"The penalty for not filing is way higher than the penalty for not paying," explains Alejandra Castro, spokesperson for the IRS. By requesting an extension, you gain an extra six months to complete your taxes. However, she adds, "that extension does not exempt them from paying their taxes."
To avoid penalties, you should estimate and pay any taxes you owe.
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The IRS states that if you don't file your taxes on time, you'll be charged a penalty of 5% of what you owe for each month or part of a month that you're late. The most you can be charged is 25% of the taxes you didn't pay.
How to Remove or Reduce a Penalty
The IRS says it “may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for not meeting your tax obligations. By law, the IRS cannot remove or reduce interest unless the penalty is removed or reduced.”
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For more information on penalty relief, click here.
How to Dispute a Penalty
If you disagree with the amount you owe, you may dispute the penalty.
The IRS recommends people "call the toll-free number at the top right corner of your notice or letter, or write a letter stating why the IRS should reconsider the penalty. Sign and send the letter along with any supporting documents to the address on your notice or letter.”
To get an extension, electronically pay all or part of your estimated income tax due, indicating the payment is for an extension.
You can make the payment directly on the IRS website, and you won't have to file a separate extension form. You'll receive a confirmation number for your records.
You can also file for an extension using the IRS Free File option, regardless of your income.
"If they can't afford to pay their taxes in full, they can go to irs.gov and set up a payment plan. This plan allows taxpayers to pay according to their ability, ensuring they're up to date with their taxes," Castro said.
