In the event a taxpayer has a balance due on their income tax return and currently unable to pay. The taxpayer should file the tax return without payment. Doing this will avoid a late filing penalty. Under §6651 of the Internal Revenue Code a penalty is imposed for failure to file a tax return. This penalty is 5% of the balance due (on the return); and 5% for each additional month the tax return is not filed but not to exceed 25%. Therefore it is more important for a taxpayer with a tax return balance due to timely file than a taxpayer who is due a refund, since the taxpayer receiving a refund will not be subject to the failure to file penalty under IRC section 6651.

1. Tax Season Scenario
Balance Due on Income Tax Return
(and taxpayer can’t pay)
Peter E. Alizio CPA ESQ.
Alizio Law, PLLC – Tax Attorney
1551 Franklin Ave #205
Mineola, New York 11501
Phone: (212) 520-2906
Email: peter@aliziotax.com

2. Introduction
As tax season winds down many taxpayers will owe taxes
when filing their income tax returns. This is not an issue
when the taxpayer has money to pay the balance due.
However, when the taxpayer does not have the funds
necessary to pay these taxes some individuals would rather
not file or file a tax return extension.

3. What is the Penalty for Failing to File a
Tax Return by the Due Date?
Under §6651 of the Internal Revenue Code a penalty is imposed
for failure to file a tax return. This penalty is 5% of the balance
due (on the return); and 5% for each additional month the tax
return is not filed, the penalty is not to exceed 25%. Therefore it
is more important for a taxpayer with a tax return balance due
to timely file than a taxpayer who is due a refund, since the
taxpayer receiving a refund will not be subject to the failure
to file penalty.
The IRS offers advice to taxpayers who owe taxes but cant pay.

4. Note: An Extension of Time to File a Tax Return
is Not an Extension of Time to Pay the Tax!
Extensions are needed when information necessary to file a
complete and accurate tax return is not available until after
the filing deadline. This is very common for taxpayer who are
partners and shareholders in flow-thru entities and receive
their K-1 after April 15th.
Taxpayers will need to estimate the amount of tax that will be
owed when the tax return is filed. This amount should be
submitted with extension (i.e. an extension payment). If the
taxpayer under estimates this amount the taxpayer may be
subject to failure to pay proper estimated tax (IRC §6654).

5. Beware of Trap!
Remember, an extension is an extension of time to file your tax
return, not to pay the tax due. Therefore taxpayers need to estimate
the amount of tax that will be owed and submit payment with the
extension. IRS TRAP AHEAD-> the IRS can VOID your
extension! If the IRS determines estimated extension payment was
not reasonable the extension will be voided (as if the extension was
never filed). If this happens the taxpayer will be hit with a failure to
file penalty under IRC §6651.
Additional information on filing a tax return extension can be found here.

6. Tip: Apply for an Installment Agreement
After filing an income tax return with a balance due (and without
making payment), the taxpayer will receive a bill from the IRS
for the tax due plus any interest or penalty. The taxpayer should
now be able to enter into a payment plan called an Installment
Agreement to pay the outstanding tax balance.
*Additional information on Installment Agreements can be found here.

7. Any Questions?
If you have any questions or need to speak
with a Long Island Tax Attorney feel free to
contact our office at (212) 520-2906.
Disclaimer: This presentation is offered for
information and educational purposes only
and not intended to be tax or legal advice.
Alizio Law, PLLC
1551 Franklin Ave #205
Mineola, NY 11501
Website: aliziolaw.com
Phone: (212) 520-2906