5 Common Myths About IRS Payment Extensions Debunked
If you owe taxes to the IRS, you may be wondering if you can get more time to pay them. You may have heard of IRS payment extensions, but are they really a good option for you? In this blog post, we will debunk some common myths about IRS payment extensions and show you how they can help you avoid penalties and interest.
Myth #1: An IRS payment extension is the same as a tax filing extension.
False. A tax filing extension gives you more time to file your tax return, but not to pay your taxes. You still have to pay at least 90% of your tax liability by the original due date or face penalties and interest. An IRS payment extension, on the other hand, gives you more time to pay your taxes without penalties, as long as you meet certain criteria and apply for it using Form 1127. However, you still have to file your tax return by the original due date or request a separate filing extension using Form 4868.
Myth #2: Anyone can get an IRS payment extension.
False. The IRS only grants payment extensions to taxpayers who can prove that paying their taxes on time would cause them undue hardship. This means that they have no assets or income available to pay their taxes without severely affecting their basic living expenses. The IRS also considers other factors, such as whether the taxpayer has a history of compliance, whether they made estimated tax payments, and whether they were affected by a disaster or other unforeseen circumstances. The IRS does not grant payment extensions for frivolous reasons or if the taxpayer was negligent or fraudulent.
Myth #3: An IRS payment extension lasts for six months.
False. The length and availability of a payment extension vary depending on the type of tax you owe and whether you have a financial hardship. If you owe taxes from your regular tax return, you can get a 120-day payment agreement or an extension of time to file using Form 4868 (but this does not extend your time to pay). If you owe taxes from a deficiency, you can get up to 18 months extra time to pay using Form 1127, and sometimes longer in special cases. You should always pay as much as possible when you file your return or request an extension and continue to send payments as quickly and as often as you can.
Myth #4: An IRS payment extension stops interest from accruing.
False. Even if you get an IRS payment extension, interest will still accrue on your unpaid taxes until you pay them in full. However, getting a payment extension will stop penalties from accruing during that period. This can save you money in the long run, since penalties are usually higher than interest rates. For example, if you dont pay your taxes on time, you may face a failure-to-pay penalty of 0.5% per month (up to 25%) plus interest (the federal short-term rate plus 3%). But if you get a payment extension and pay within that period, you will only owe interest.
Myth #5: Getting an IRS payment extension is complicated and expensive.
False. Getting an IRS payment extension is actually quite simple and affordable if you qualify for it and file Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship. You need to fill out some basic information about yourself and your tax situation, attach supporting documents (such as bank statements or bills) that show your financial hardship, and submit your form electronically or by mail before the due date of your tax return or payment. The IRS will review your application and notify you of their decision. If approved, you will get more time to pay your taxes without penalties, but you will still owe interest on your unpaid taxes until you pay them in full. Form 1127 is free to file, and you can find it on the IRS website.
Filing Extension vs. Payment Extension: What's the Difference?
As you can see, there are many myths and misconceptions about IRS payment extensions that can prevent you from getting the relief you need. Dont let these myths stop you from applying for a payment extension if you are facing financial hardship and cant pay your taxes on time. A payment extension can help you avoid penalties and give you more time to settle your tax debt with the IRS. However, remember that a payment extension is not the same as a filing extension, and you still have to pay interest on your unpaid taxes until they are paid in full.
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Don't let late tax filing penalties and interest charges hold you back: How IRSExtension.Online can help
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