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What Should You Do if You Will Owe Income Tax When You File?

By Chuck McCabe | February 12, 2014

Consider filing early…

If you expect to owe the IRS and/or Virginia Tax Department you should file your tax returns as soon as possible. However, you do not have to pay until the tax filing deadline, which for calendar year taxpayers for the IRS is April 15th and for Virginia is May 1st. You can pay on or before April 15th, either online at www.irs.gov/e-pay or by phone at 888-729-1040 with a credit card, debit card or direct bank transfer from your bank account. You can also pay by completing and mailing IRS Form 1040-V (Voucher) with your check or money order. For Virginia you can make payments online at www.tax.virginia.gov or by mail using Form 7601P Automatic Extension Payment.

Important: Although you can obtain an automatic extension of time to file your tax returns, you cannot extend the time to pay any taxes you may owe. Failure to pay your taxes by your tax filing due date will result in stiff penalties plus interest charges.

Installment Agreements: If you cannot pay everything you owe to the IRS, you can request an installment payment arrangement. The IRS charges the following fees for setting up an installment agreement: $52 for a direct debit agreement, $102 for a standard agreement or payroll deduction agreement or $43 if your income is below a certain level. You may submit Form 9465 Installment Agreement Request indicating your proposed installment payments. The IRS will notify you within 30 days if your proposal is accepted. The installment plan will not prevent penalties and interest from accruing. Therefore, you should arrange to pay what you owe as quickly as possible. Although Virginia does not have an installment agreement form, you should be able to arrange an installment payment plan by calling the Virginia Department of Taxation at 804-440-5100.

If you do not expect to owe tax to the IRS and/or Virginia, and you cannot file your return(s) by the filing deadline, you can apply for an automatic 6 month extension to file and there will be no penalties for late filing.

Penalties and Interest charges are described at the following website links:

IRS: http://www.irs.gov/uac/Failure-to-File-or-Pay-Penalties:-Eight-Facts

Virginia: http://www.tax.virginia.gov/site.cfm?alias=PenaltiesAndInterest#LateFilingPenalty

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