For most of us, our 2024 income tax returns are due to be filed on April 15, 2025.* If you are one of the many taxpayers who left their job and became an independent contractor in 2024, you may now be facing a balance due on your 2024 tax return. Not wishing to face such a problem, some taxpayers in this situation decide not to file their return or an extension and this can be costly.
The penalty for failing to file a tax return runs 5% per month and caps out at 25%, while the penalty for failure to pay is only 1/2 of one percent per month. So if you are facing that situation this year, it is beneficial to file your return on time and seek a solution to pay what you owe. For this purpose, filing on time includes filing by October 15, 2025, if you file an extension of time to file with the IRS by April 15.
By filing timely when you cannot pay, your monthly penalty will be reduced by 90%. Importantly, the IRS will work with you to set up a plan to pay your tax over time. You can even get an installment agreement on the irs.gov website in most situations. If you are unable to pay the taxes owed in installments, the IRS also offers other alternatives such as partial pay installment agreements and “CNC” status designation (currently not collectible). However, if you were placed in either of these statuses for past years, you must remain current going forward; in most situations, it is more important to be current going forward and secure a collection alternative for the past.
To prevent future tax problems, pay your estimated taxes for 2025 by the quarterly due dates (4/15/2025, 6/15/2025, 9/15/2025, and 1/15/2026). Your tax preparer can advise you on how to do this. We also recommend that you make your payments electronically.
*There are exceptions due to hurricanes, floods, and fires extend that deadline.
