CNBC: Here’s what to do if you can’t pay your taxes by April 18

The deadline for filing federal taxes is less than a week away for most Americans, and if you can’t pay your balance by April 18, you may have options, tax experts say.

Whether you file your return on time or request an extension, you must pay all taxes owed by the original due date to avoid accumulating penalties and interest.

According to Lawrence Pon, Certified Financial Planner and Certified Public Accountant at Pon & Associates en Redwood City, California.

Here’s a look at some other tax planning news.

Here’s why: The penalty for failing to file is 5% of your outstanding balance per month, capped at 25%, plus interest. For comparison, the late payment penalty is 0.5%, also monthly and capped at 25%, with interest.

However, some areas, like most of California and parts of New York, have more time to file and pay this season due to natural disasters, Pon said. There is a full list here.

Don’t ignore IRS notices

Another common mistake is ignoring correspondence from the IRS once you’ve fallen behind on your taxes, experts say.

Sheneya Wilson, a chartered accountant and founder of Fola Financial in New York, said avoiding malpractice was her “biggest piece of advice”.

If you receive a letter from the IRS regarding an outstanding balance, you should respond promptly to that notice, he said. Otherwise, solutions with the agency may become more difficult.

Whether you’re struggling with a first-time balance or a past tax debt, here are some options to consider.

1. installment agreements

Wilson said the most popular option is to apply for an installment agreement, which is a long-term monthly payment plan through the IRS that “takes about five minutes” to set up.

If you owe $50,000 or less, including taxes, penalties and interest, you can set up a payment plan online, but you’ll have to call the IRS for larger amounts, he said. declared.

However, the agency will not approve the plan if you have not submitted statements for previous years. And if you miss a payment, the IRS can void the installment agreement and your remaining balance will become due, Pon said.

2. Offer in Compromise

Another option, the Offer in Compromise, can allow you to settle for less than you owe. But the IRS is urging taxpayers to explore “all other payment options first.”

If you can prove you’ve experienced financial hardship, it may be possible to reduce your balance through an offer in compromise, Wilson said.

“The IRS allows you to significantly reduce the total amount owed,” he said. But you must be current on all returns and estimated tax payments to qualify.

You can start with the Offer in Compromise Prequalification Tool to assess whether you meet the criteria and submit an application from the Offer in Compromise Booklet.

3. Currently not collectible

There is also a “currently uncollectible” status, in which the IRS temporarily stops trying to collect outstanding balances.

If the return is approved, your debt may still incur penalties and interest, and the IRS can use your future tax refunds to cover the balance, according to the Taxpayer Advocate.

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This article It was originally published in English by Kate Dore, CFP® for our sister network CNBC.com. For more on CNBC, head here.