Do I have to pay my taxes if I file an extension?

If you are one of the millions of taxpayers who filed for an extension this year, you might be wondering what your next steps are. While an extension gives you more time to file your return, it does not give you more time to pay your tax balance. In fact, if you owe money to the IRS, you may face penalties and interest charges for paying late. Here are some things you need to know about paying your tax balance with

an extension.

The deadline for paying your tax balance is April 15, regardless of whether you file an extension or not. If you pay after this date, you will incur a failure-to-pay penalty of 0.5% of your unpaid balance per month, up to a maximum of 25%. You will also have to pay interest on your unpaid balance, which is currently 3% per year, compounded daily.

You can avoid or reduce the failure-to-pay penalty if you paid at least 90% of your tax liability by April 15 and pay the remaining balance by the extended due date. This is known as the safe harbor rule. However, you will still have to pay interest on the unpaid balance.

- You can request a payment plan with the IRS if you cannot pay your tax balance in full by the extended due date.

There are different types of payment plans available, depending on your situation and how much you owe. Some payment plans may require a setup fee or a monthly fee. You can apply for a payment plan online, by phone, or by mail.

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- You can also request an offer in compromise with the IRS if you have a financial hardship and cannot pay your tax balance in full or in installments. An offer in compromise is an agreement between you and the IRS to settle your tax debt for less than the full amount. The IRS will consider your income, expenses, assets, and ability to pay when evaluating your offer. You can use the IRS online tool to check your eligibility and prepare your offer.

- You should file your tax return as soon as possible, even if you cannot pay your tax balance in full. Filing your return will stop the failure-to-file penalty, which is 5% of your unpaid balance per month, up to a maximum of 25%. The failure-to-file penalty is much higher than the failure-to-pay penalty, so it is better to file your return and pay as much as you can.

Paying your tax balance with an extension can be stressful and costly, but there are options to help you reduce or avoid penalties and interest. The sooner you file your return and pay your balance, the less you will owe to the IRS.