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As Tax Day approaches, many people find themselves in a situation where they are unable to pay their taxes by the deadline. The IRS offers tax extensions, which can push the filing deadline to October 15. However, one common misconception about tax extensions is that they provide additional time to pay. In reality, the extension only gives you extra time to file your return, not to pay your taxes.

If you are unable to cover your taxes in full by the deadline, it is still crucial to file your return by April 15 and pay as much as you can. Failing to file your taxes can lead to compounding interest and penalties, which can significantly increase the amount you owe to the IRS. The failure-to-file penalty is 5% of your unpaid taxes per month, while the late payment penalty is 0.5% per month. It is essential to file your return to avoid these penalties.

If you find yourself unable to pay your taxes on time, the IRS offers various payment options to help you settle your balance. You can apply for a short-term payment plan if you owe less than $100,000, allowing you up to 180 days to pay in full. Alternatively, a long-term payment plan may be available if your balance is less than $50,000, giving you up to 72 months to pay off the amount.

To apply for a payment plan, you can do so online, by phone, or by sending Form 9465 by mail. The online option is quick and easy, making it a preferred method for many taxpayers. It is important to note that you cannot have multiple payment plans for different tax years, as the IRS does not want taxpayers on continuous payment plans. While you will still incur interest and late-payment penalties, the failure-to-pay penalty is reduced when you are on an installment agreement with the IRS.

If you are unable to pay your taxes on time, it is important to file your return by the deadline and pay what you can to avoid compounding penalties and interest. The IRS offers various payment options to help you settle your tax balance, whether through a short-term or long-term payment plan. By taking the necessary steps to address your tax debt, you can avoid additional financial burdens in the future.

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