IRS Recommends Payment Plans for Taxpayers Who Missed April 15 Deadline

Taxpayers can pay part of their dues and make the remaining payments in installments.

The Internal Revenue Service (IRS) building in Washington on Jan. 4, 2024. Madalina Vasiliu/The Epoch Times

The IRS reminded individuals who have yet to make their 2023 tax payments that multiple payment options exist.

Taxpayers who missed the April 15 deadline to file and pay their 2023 returns “should file their tax return and pay any taxes they owe as soon as possible to reduce penalties and interest,” the IRS said in a June 10 statement.

While taxpayers can seek a filing extension, “an extension to file is not an extension to pay,” the agency noted.

“An extension to file provides an additional six months with a new filing deadline of Oct. 15. Penalties and interest apply to taxes owed after April 15, and interest is charged on tax and penalties until the balance is paid in full,” it stated.

The IRS advises people to “pay what they can” and then use any of the payment plans to cover the balance.

The agency offers short-term and long-term online payment plans. The short-term plan, which has to be made within 180 days, is available to taxpayers who owe less than $100,000 in taxes, penalties, and interest.

The long-term plan is for taxpayers owing less than $50,000. Payments can be made over a period of up to 72 months. If the balance owed is between $25,000 and $50,000, direct debit is mandatory.

“Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 15, the failure to pay penalty is cut in half while an installment agreement is in effect,” the IRS stated.

To apply for a payment plan, the taxpayer needs to create an account at ID.me and submit photo identification. Those who apply for a direct debit plan need to provide bank routing and account numbers.

The short-term plan comes with no setup fee.

For the long-term plan, a setup fee of $31 is charged if the taxpayer pays monthly through automatic withdrawals, although the fee is waived for low-income people. If the taxpayer opts out of automatic withdrawals, a setup fee of $130 is charged, out of which $43 could be reimbursed to low-income individuals.

Taxpayers can also revise their existing payment plan, changing items such as their monthly payment amounts, monthly due dates, and bank account numbers. A $10 fee is charged for these revisions.

The IRS noted that while the deadline for taxes was April 15, some taxpayers have automatically qualified for extra time to file and pay taxes without being subject to interest and penalties. This includes taxpayers living in certain disaster areas, U.S. citizens who live and work outside the United States and Puerto Rico, and members of the military who are on duty outside the United States and Puerto Rico or serving in combat zones.

Penalty Relief

The IRS pointed out that unpaid taxes currently attract an 8 percent interest rate, compounded daily. The late filing penalty is typically 5 percent per month, while the late payment penalty is 0.5 percent. Both penalties max out at 25 percent.

If a return is filed more than 60 days after the due date, the minimum penalty charged would be $485 or 100 percent of the unpaid taxes, whichever is less.

Some taxpayers can qualify for penalty relief. In certain cases, taxpayers may get relief from a penalty by administrative waiver if it’s their first penalty or they meet certain conditions. To qualify for this waiver, the taxpayer should have a history of good tax compliance.

Penalties can be reduced or removed in full if the taxpayer is deemed to have acted with reasonable cause and in good faith.

“Reasonable cause is determined on a case-by-case basis considering all the facts and circumstances of your situation. Reasons that qualify for relief due to reasonable cause depend on the type of penalty you owe and the laws in the Internal Revenue Code (IRC) for each penalty,” the IRS stated.

“Reasonable cause doesn’t apply to certain penalties such as the estimated tax penalty.”

With the April deadline long past, the IRS had released details on its tax collection. By April 5, the agency received more than 101.84 million returns in the 2024 filing season, up by 0.5 percent from last season. The number of returns processed dipped by 0.3 percent.

The total number of refunds processed was 3.3 percent lower. However, the total amount refunded to taxpayers came in 1.1 percent higher at more than $201 million. The average refund amount for the season was $3,011, up from $2,878 last time.

Data show that the IRS had netted almost $4.7 trillion in taxes for fiscal year 2023 between Oct. 1, 2022, and Sept. 30, 2023.

The agency is also making its free tax-filing program, Direct File, a permanent option for filing federal tax returns beginning in the 2025 tax season. During the pilot test in the 2024 tax season, Direct File was used by more than 140,000 taxpayers in 12 states.

IRS Commissioner Danny Werfel said the pilot testing sent a “clear message” that many taxpayers in the United States want the IRS “to provide more than one no-cost option for filing electronically.”

Republicans have opposed the Direct File program, noting that it essentially allows the IRS to act as a tax preparer, filer, and auditor.

“Congress has never granted the Department of the Treasury authority to create a Direct File program. And for good reason: the American taxpayers do not want to invite the proverbial fox into the hen house,” a group of 13 GOP attorneys general said in a Jan. 30 letter to Treasury Secretary Janet Yellen.

“A Direct File program will also have negative consequences for low-income filers and devastate small businesses.”