For the estimated 10 million Americans who requested a tax filing extension with the IRS or their State for the typical April 15th filing deadline, realize that this extension was only good for 6 months or until October 15th, 2009. As you probably know, you had to submit an estimated payment with this extension (if you are self-employed or don’t work for a company) because any filing extension is not an extension to pay but an extension to file. Essentially, an extension would have prevented a taxpayer from incurring any late filing penalties with the State or Internal Revenue Service. For any amount owed though, interest accrued for the amount owed for the last 6 months.
One thing to be aware of is many states have online filing systems that can help you quickly file your State taxes like California (CalFile), NY and others. The IRS has Free File or E-File programs as well to help you quickly get the task completed. However, be cautious in doing this if you plan on itemizing deductions or expenses because your total liabilities will be much higher than if you complete your unfiled IRS tax return with a tax professional or yourself. In relation to the IRS, if you don’t file your taxes eventually the IRS will file a Substitute For Return for you which means that they will just use what information they have on you (W-2, 1099s etc) and you will miss out on any deductions or expenses you wanted to itemize to lower your total tax liabilities.
If you have misplaced important filing documents like a W-2, or 1099, you can contact the IRS toll free (1-800-829-1040) or your State to obtain this information. The IRS will be happy to inform on the status of your account including any taxes owed, what estimated payments have been made, and so forth.
Even if you don’t have the ability to pay outstanding taxes with your State or the IRS, still file a tax return and reach out to a tax professional for help in trying to resolve or possibly settle for less than you owe. If you believe you are owed a refund, then work with a tax expert to ensure you get what is owed to you. Realize that the IRS and many states like California and New York offer Installment Agreements which are basically agreements between you and the State/IRS to pay back your taxes over time or in a series of monthly installments. Many people in this economic downturn are hurting, and Installment Agreements help taxpayers by allowing them to pay liabilities per month instead of all at once. The only downside to an Installment Agreement is you will end up paying more in the end that originally owed because tax liabilities and interest will accrue each month.
Overall, file your taxes as quickly as possible if you have or have not received a filing extension as the penalties and interest will continue to increase your total tax liability. If you did receive an automatic extension on April 15th, 2009, then make sure to file your taxes by this Thursday October, 15th. Work with a tax professional, or use a tax filing assistance program like TurboTax to get the job done instead of having your State or the IRS complete a return for you because again they will not include any expenses or deductions in your return. Tax advantage of the new home purchase tax credit of $8,000 (does not have to be paid back) if you purchased a home between 4/8/2008 and 12/1/2009, as well as teh health coverage tax credit, energy efficiency and renewable energy incentives, unemployment tax benefits credit, transportation, education 529 savings accounts and more if applicable which can be read on IRS.gov website or by contacting a tax professional team like us here.