Can an Offer of Settlement Be Made at the Time of Filing Late Federal Taxes?
- If you cannot complete your tax return by April 15, you can request an extension. The extended filing deadline is October 15. If either deadline falls on a weekend or federal holiday, the due date is the next business day. An extension only affects the filing deadline; any tax due must be paid by the April due date.
- If you pay your tax due after the April deadline, the IRS assesses a penalty of one-half of 1 percent of the amount due per month. The penalty for failure to file a return is 5 percent of the tax due per month. The failure to file penalty is waived if an extension was filed, so long as the return is submitted by the extension due date.
- When you file your return, whether on time or late, the IRS expects you to pay the full amount of tax due. If you cannot pay the full amount, the IRS offers a short-term payment arrangement of up to 120 days to pay. There is no fee for this arrangement, but penalties and interest may still accrue. If you know you will be unable to pay within 120 days, you can request an installment agreement when you file your return.
- An installment agreement sets up a monthly payment plan, based on the amount you're able to pay each month. Request an installment agreement on IRS Form 9465, indicating the amount you're paying with the request, the amount you will pay each month and the date the IRS will receive your monthly payment. Typically, the IRS responds within 30 days to accept or reject your request or ask for more information. A $105 fee applies to installment agreements, and you can only have one open installment agreement at a time. You must pay your debt within three years on an installment agreement.
- An offer in compromise settles your tax debt for less than the full amount due. Before filing an offer in compromise, you must explore all other payment options, including an installment agreement. Offers in compromise are filed separately from your tax return and at a different address. If you fail to file or pay your tax returns while you are paying on your offer, or for five years after your offer is accepted -- whichever is longer -- you default on your offer, and the entire original amount is due, plus all penalties and interest.