A filing extension DOES NOT extend the tax-payment deadline. Taxpayers will owe interest on any amounts not paid by the April 17th deadline, plus a late payment penalty if they have paid less than 90 percent of their total tax due by that date.

United States citizens or residents whose home and main place of business or post of duty is outside the United States and Puerto Rico on the due date of their return are allowed an automatic extension until June 15th to file their return AND pay any tax due. This also applies to taxpayers in military or naval service on duty outside the United States and Puerto Rico. If the taxpayer uses this automatic extension, he must attach a statement when he does file his return showing that he met the requirements for the extension on the due date of the return.

If the taxpayer is serving in a combat zone, a qualified hazardous duty area, or in a contingency operation (or is hospitalized as a result of an injury received while serving in such an area or operation), he or she has at least 180 days after he or she leaves the designated area to file and pay taxes. Refer to Topic 301 for more information about extensions. Also click here: http://www.irs.gov/newsroom/article/0,,id=97273,00.html Further information is in Publication 3, Armed Forces' Tax Guide.

If the taxpayer is determined by the IRS to be affected by a Presidentially declared disaster or a terroristic or military action, then the taxpayer may have up to one year after the due date of the return to file and pay taxes, depending on the deadline specified by the IRS.

If the taxpayer’s return is completed but they are unable to pay the tax due, DO NOT request an extension. File the tax return on time and have the taxpayers pay as much tax as they can. The IRS will send them a bill or notice for the balance due. To apply for a payment agreement click here: http://www.irs.gov/businesses/small/article/0,,id=108347,00.html Also see Extensions of Time to Pay below.

Making Payments
Taxpayers can charge their taxes on their American Express, MasterCard, Visa, and Discover cards - or by using their debit card. The debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card contact one of the service providers at it's telephone number or web site. In the 1040 ValuePak Portal click Tax Preparation Help > Go to IRS Help > Payments by Credit Card - or  click here. The service providers charge a convenience fee based on the amount the taxpayer is paying. Do not add the convenience fee to the tax payment. At the completion of the transaction the taxpayer(s) will receive a confirmation number for their records.

Extensions of Time to Pay
Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A taxpayer can request an extension from 30 - 120 days depending on the taxpayer's specific situation. Taxpayers qualifying for an extension generally will pay less in penalties and interest than if the debt is repaid through an installment agreement. An additional amount of time to pay can be requested through the Online Payment Agreement application or by calling 800-829-1040.

Installment Agreements
The IRS may allow taxpayers to pay any remaining balance in monthly installments through an Installment Agreement. They can apply for an Installment Agreement using the IRS’s Online Payment Agreement. This application allows eligible taxpayers or their authorized representatives who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval.

Another alternative is to attach a Form 9465 - Installment Agreement Request, to the front of the tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if paid via direct debit. If the taxpayer’s income is below a certain level (see Form 13844, Application For Reduced User Fee For Installment Agreements), they may qualify for a $43 fee. They will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. To prepare Form 9465 simply click Your Forms and select Form 9465 from the Misc tab.

Mailing a Payment
If the taxpayer mails the payment, Form 1040-V is not required. The taxpayer simply needs to write their Social Security number, daytime telephone number, and 2011 Form 4868 on the check or money order.

If the taxpayer's failure to file his tax return on time was due to reasonable cause and not willful neglect the IRS won’t assess the failure-to-file penalty. The taxpayer must prove reasonable cause.

The entire amount of tax due must be paid with Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Extensions of time to file a tax return do not extend the due date for payment of any tax.

If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if the taxpayer files his return more than 60 days after the due date (including extensions), the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

Disputing Penalties
Penalties can be avoided if the relevant facts affecting an item's tax treatment are adequately disclosed in the tax return. However, disclosure cannot be used to avoid incorrect valuation penalties.

Another way to dispute a penalty is to show that substantial authority exists for your tax treatment of an item. To establish substantial authority for a position, look to tax documents published in the Internal Revenue Bulletin, tax court cases, private letter rulings issued by the IRS, and some congressional reports. Authority supporting your tax position should be substantial in relation to the weight of authority supporting contrary tax treatment.

If a penalty is assessed by the IRS the taxpayer can appeal. While the appeal is under consideration, payment of the penalty is suspended. The taxpayer also has a right to representation and can ask to have a meeting with the IRS.

The penalty for filing a frivolous tax return is not based on tax liability and will be assessed immediately and added to any other penalties.