Here’s how it adds up:

• Interest: The interest is calculated from the date the money is due (April 15) until you have settled your balance. This rate (which is determined quarterly) works off the federal short-term rate plus adds an additional three percent. The interest is also compounded on a daily basis. In recent years, the rate has ranged from 4 to 9 percent.
• Penalties: Penalties are 0.5 percent of what you owe (which is capped when it reaches 25 percent of the total you owe in taxes) until it is paid in full.
• Installation Plans: If you set up an installment plan with the IRS, in addition to the interest and penalties you will owe, you will also incur a set-up fee of $43. This will be billed separately.

Getting An Extension

It’s possible to apply for an extension of the time you have to pay your taxes, but it is difficult to get such a request approved by the IRS. If you do plan to try, you must apply for this status by or before April 15. You also have to provide a detailed list of all of the assets and liabilities you had at the end of the preceding month, as well as a list of all money going in and out of your household for the past three months. Further, you must be able to prove that paying your taxes right now would result in an undue hardship for you and that you don’t have any means to get the money at the moment. If an extension is granted, it will usually be limited to six months. In addition, you may have to put up some personal property as collateral until this debt is settled.

Worth A Note

If you find yourself repeatedly missing the deadline to file your taxes, you may be in for an unpleasant surprise, as the IRS is stepping in and preparing returns for some people who repeatedly choose not to comply with the law. In cases such as this, you may find that the prepared doesn’t give you the deductions and exemptions to which you would have been entitled. In addition, you will also be charged the appropriate penalties and interest as well, and if this happens multiple times, you may find yourself subject to harsher enforcement measures.

Learn More

If you have questions about your taxes or need help with them, you should contact a CPA, accountant, tax attorney or the IRS. You can also visit the IRSwebsite or go to LateFile to read more about filing late and to access tax extension forms.