Worried about your upcoming tax liability? Not sure how you’re going to pay your 2024 taxes? If so, you are not alone, and if you need help, you should reach out to us at Damien’s Law. We can help you explore options, set up payments, and avoid unwanted consequences for unpaid taxes.
Your 2024 taxes are due April 15, 2025, and even if you cannot afford to pay, you should still file a return on time to minimize penalties or request an extension as needed. The good news is that there are many options for people who cannot afford their taxes. This post goes over the major deadlines, the payment options, and what to expect if you don’t pay.
Key Tax Filing and Payment Deadlines for 2025
Here are the deadlines you need to know:
- January 15, 2025 – If you pay quarterly, your estimated payment for the last quarter of 2024 is due on this date. Making this payment helps you avoid interest and estimated tax penalties when you file your 2024 return.
- April 15, 2024 – Your tax payment is due on this date. Your return is also due unless you file an extension.
- October 15, 2025 – Your return is due on this date if you request an extension.
Requesting an extension only moves the due date for the tax return. It does not change the due date for your tax payment. However, even if you cannot pay, you should always file on time whether that’s by the original deadline or the extended deadline.
Filing late leads to a penalty of 5% of the unpaid tax, while paying late only leads to a 0.5% penalty. For example, imagine that you owe $20,000. If you don’t file and don’t pay, the penalty is $1,000. In contrast, if you file but don’t pay, the penalty is only $100. However, in both cases, the penalty applies monthly so you need to make payment arrangements as soon as possible.
Extended Deadlines for Taxpayers Affected by Disasters
The IRS gives additional time to individuals and businesses that are in federally declared disaster areas. Taxpayers in the following areas have until May 1, 2025 to file returns with deadlines from Sept 25, 2024 to May 1, 2025:
- Victims of Hurricanes Helene and Milton in Georgia, South Carolina, North Carolina, Alabama, Virginia, and Tennessee
- Victims of flooding in Chaves County, New Mexico
- Taxpayers affected by flooding in Alaska
For example, if you requested an extension on your 2023 tax return, its extended due date was October 15, 2024, and because that falls in the above range, you now have until May 1. You also have until that date to file 2024 individual and corporate returns (without an extension), quarterly payments, etc.
Taxpayers affected by disasters in the Crow Tribe of Montana, Cheyenne River Souix Tribe, Saint Regis Mohawk Tribe, Havasupai Tribe in Arizona, and the San Carlos Apache Tribe in Arizona have until Feb 3, 2025 to file returns with deadlines on or after August 22, 2024. This extension does not affect the deadline to file your 2024 return, but it does extend the deadline for 2024 Q3 and Q4 payroll returns, 2024 Q3and Q4 estimated quarterly tax payments, and similar deadlines.
Taxpayers affected by terrorist attacks in Isreal have until Sept 20, 2025 to file their 2023 and 2024 tax returns and payments. If you are not on this list but you believe that you have been affected by a disaster or another event out of your control, you may qualify for reasonable cause penalty relief which helps you avoid penalties for paying or filing late.
IRS Interest Rate 2025
The IRS assesses interest on unpaid taxes at the federal short-term rate plus three percent, and the rate changes quarterly. For the first quarter of 2025, the interest rate is 7% for individuals and most other taxpayers. The rate is 9% for corporate underpayments of $100,000 or more.
However, 2024 taxes are due April 15, 2025, which is the second quarter of 2025. Because the rate adjusts quarterly, there may be a different interest rate at this time.
Immediate Steps to Take if You Cannot Pay
If you cannot pay, don’t panic. Generally, you have at least 120 days before the IRS starts any collection actions. However, during this time, you will be incurring interest and penalties on your balance due, so you should make a plan. Do the following immediately:
- File your return – As explained above, you should always file a tax return even if you cannot afford to pay. Filing a return helps to reduce the penalties you’ll face.
- Review your options – The IRS has multiple types of payment plans and settlements for people who cannot afford to pay their taxes in full.
- Set up a payment extension if possible – If you owe $100,000 or less and can pay in full within 180 days, go to the IRS website and request a short-term payment plan. Then, you won’t face any unwanted collection actions.
- Consider requesting an installment agreement when you file – You can attach Form 9465 to your 2024 tax return to request a long-term payment plan on your tax liability. Alternatively, you can set up payments online if you owe less than $50,000.
- Pay as much as possible – Paying as much as you can reduce your overall penalties and interest. It also shows the IRS that you’re serious about getting back into compliance.
Consider talking with a tax pro to ensure that you’re optimizing your tax return and that you understand your options.
Options for Unpaid Taxes
You know you’re going to owe taxes in 2025 for the 2024 tax year, so what are the options? Here are the main payment and relief options offered by the IRS:
- Short-term payment plan – If you owe $100,000 or less and can pay in full within 180 days, the IRS will not pursue any collection actions against you. Just call or go online to take advantage of this option.
- Long-term installment agreement – You can take up to six years and even longer in some cases to make monthly payments on your tax debt. If you owe less than $50,000 and can pay off the balance within six years, you can make arrangements online. Otherwise, you will need to apply through the mail or over the phone, and you may need to provide financial details to get approved.
- Offer in compromise – If you show that you cannot afford to pay the tax bill after taking into account your disposable income and the equity in your assets, the IRS may agree to settle through an offer in compromise. However, the IRS will generally only settle your 2024 taxes if you indicate that you are unlikely to incur tax debt in the future. In particular, you must show that you have taken care of the issue that led to this year’s tax bill.
- Currently not collectible status – If you cannot afford to pay anything, you establish that fact by providing the IRS with financial details. Then, they mark your account as currently not collectible and stop all collection actions until your financial situation improves, but interest and penalties will continue to accrue on your account.
How to Avoid Unexpected Tax Bills in the Future
Figure out why you owed taxes this year, and take steps to avoid owing in future years. For example, if you run your own business and you didn’t pay quarterly, start setting aside a portion of your wages to pay quarterly taxes. If you’re employed, have your employer withhold more money from your paycheck.
If you don’t currently work with a professional tax planner, consider consulting with one to talk about strategies to reduce your tax bill. In particular, ensure that you’re optimizing deductions and credits to keep your tax liability as low as possible. In 2024, you can make slightly higher contrbutions to IRAs, 401ks, and health savings accounts (HSAs). You can generally contribute until the April 2025 deadline and count the contributions on your 2024 tax return.
Special Considerations for Paying Taxes 2025
The IRS has announced plans to increase enforcement, especially against high income earners who have unfiled or unpaid taxes. If you do not file or pay, you will incur penalties and interest as noted above, but you may also face wage garnishment, asset seizure, and bank levies.
If you’re worried about facing a tax bill or dealing with unpaid taxes, you may want to let a tax attorney handle communications with the IRS for you. They can provide you with guidance and peace of mind.
At Damien’s Law, we focus on helping our clients find the best resolutions for their unique situations. To get help now, contact us today. We are a boutique tax firm that commits to providing our clients with services and solutions tailored to their needs. Act now to regain control of your financial situation. We can also help with Mississippi, Tennessee, or other state taxes.
