For most Americans, tax day usually falls on April 15th but extensions are available for people who need more time to file. According to the IRS, approximately 12 million taxpayers requested an extension this year, giving them an additional six months to get their paperwork in order. With the October 15th filing deadline right around the corner, the pressure is on to finish your return. Here are a few things to keep in mind if you’re doing your taxes at the last minute.
It may seem pointless to file a tax return if you can’t afford to pay what you owe but not filing at all will only get you in hot water with Uncle Sam. The IRS can assess a failure-to-file penalty equal to 5 percent of your total tax due every month you’re late, up to a maximum of 25 percent of what you owe. Whether you owe a few hundred or a few thousand dollars, not filing a return at all will only make your tax bill that much bigger.
If you’re able to make the filing deadline but you still can’t pay, a penalty will apply but it’s not as severe. The failure-to-pay penalty is currently one-half of 1 percent of your unpaid taxes and it’s also assessed on a monthly basis. If you requested an extension and paid at least 90 percent of the tax due, you may not get hit with the failure-to-pay penalty but you’ll have to get the remaining balance paid up by the October 15th deadline.
On top of the penalties you may have to pay, it’s also important to remember that interest is accruing daily on your unpaid tax bill. The longer you wait to complete your return, the more you’ll likely end up paying in the long run.
While October 15th is the cutoff date for most late-filers, additional time is available for certain taxpayers. For example, if you’re in the military and currently serving in a combat zone, you have 180 days after you leave the combat zone to file your return and pay any taxes owed. If you’re out of the country, you may be able to get an additional two months to file your return. You have to send a letter specifying why you need more time to the IRS by October 15th but if your request is denied, you’ll be on the hook for any penalties or interest that accrue.
For this year only, the IRS is also allowing a special extension for those who were affected by the recent flooding in Colorado. Taxpayers who live in the affected disaster area have until December 2nd to file their returns and pay any taxes due. The extension applies to both individual and business tax filings.
If you have an outstanding tax bill but you don’t have the cash to cover it, you shouldn’t panic. The IRS Fresh Start Program is designed to help taxpayers pay down their taxes owed while reducing penalties and interest. Payment plans are available for business owners and individual taxpayers but you have to meet certain criteria to qualify.
Streamlined Installment Agreements are available if you owe less than $50,000. Under this type of agreement, you have 72 months to eliminate your tax liability. If you own a small business and owe less than $25,000, you can apply for an In-Business Trust Fund Express Installment Agreement which gives you 24 months to pay down what you owe. You can apply online for a Streamlined Installment Agreement or fill out Form 9465, Installment Agreement Request. Taxpayers seeking an In-Business Trust Fund Express Installment Agreement should visit their local IRS office for assistance.
With just a few days left to go, you can’t afford to put off filing your taxes any longer. Whether you owe money or you’re actually due to a refund, it pays to make sure you get your return in on time.
This post was published on October 11, 2013