Did you know that if you are going to owe money on your federal tax return, you have to pay on time even if you file to extend your due date. If you don’t pay on time you will start accruing interest and penalties the minute it’s due. Unless you apply for an IRS payment plan.
What if you can’t pay on time? If your self-employed income has dropped or if you are unemployed there’s no need to panic. The IRS has a new program that offers assistance to people who are having trouble paying. It’s part of the Fresh Start initiative designed to provide quick and easy solutions to taxpayers.
The bottom line is: file your taxes even if you can’t pay. File them on time or file Form 4868, which is an Automatic Extension of Time to Pay Federal Income Taxes. Then, if you owe money, work out an IRS payment plan.
There is also penalty relief. You won’t get a penalty for paying late if you became unemployed or if you are self-employed and your income fell. If you have been unemployed for more than 30 days you will be able to avoid penalties on failing to pay your income taxes on time. For self-employed taxpayers, your income must have dropped by at least 25% to qualify for penalty relief. The drop in income must be due to the economy. Also, you can’t make more than $200,000 if you want penalty relief.
The penalty relief lasts for six months. In other words, you get an extra six months to pay your federal income taxes. Pay by October 15 to avoid failure to pay penalties.