are due April 18.
should you do if you canít finish your tax return on
time or if you donít have the money to pay your taxes
is a common belief that you should be among the masses
filing by the April deadline so you donít draw
attention to yourself from the IRS and bring on an
thereís a difference of opinion among tax
professionals about whether that belief is valid.
Taxpayers who canít meet the deadline can file for
extensions that will let them submit their tax returns
later. And they should file for extensions if they canít
get their tax return done right by the filing deadline,
said San Francisco tax attorney Robert Wood.
most dangerous approach would be to file in a rush and
make mistakes, he said. Mistakes can result in
penalties. So if you canít get your tax return right
by April 18, he said, you can buy yourself six extra
months by applying for an extension with Form 4868. The
deadline for filing a Form 4868 is also April 18, but
the extension gives you until Oct. 16 to get your return
in order and filed.
tax attorney Robert McKenzie says that in the current
environment you may have less chance of getting audited
if you file for a six-month extension than if you are on
time with your return in April.
reason: The IRS has suffered huge staff reductions and
has had to cut back on audits. If the staff has taken on
all the audits it can handle with the returns filed in
April, the IRS may be less able to devote attention to
those with extensions.
the cutbacks, taxpayers always risk that theyíll be
caught if they make mistakes or cheat. McKenzie notes
that the IRS has computers that spot red flags in any
filing ó whether in April or in an October extension.
make sure that if you file for an extension you realize
that you are only giving yourself more time to finish
your paperwork. That doesnít delay your tax bill. You
still need to pay the taxes you owe April 18. You will
need to estimate what they will be and pay the IRS.
you donít pay on time there will be penalties ó
expensive ones. Each month that you donít pay, you get
hit with a 0.5 percent penalty charge on what you owe.
In addition, you will be charged 4 percent interest per
year. The IRS will also charge you 4.5 percent per month
during the first 5 months you are late with filing your
return. Skip payments long enough and the charge for a
late payment can go as high as 25 percent. If the IRS
sends you notices and you ignore them, your penalty
charge can go to 1 percent a month.
might tempt you to hide rather than filing a tax return
or extension that might put the IRS on notice that you
owe taxes. Donít do it.
you decide not to file a tax return on time, the penalty
is harsh ó 5 percent of what you owed at the start.
And thereís more: There are late filing fees and late
payment fees. The total can be as much as 47.5 percent.
the other hand, if you canít afford to pay your taxes
and you tell the IRS, you can be put on an installment
plan for up to six years.
you owe under $50,000 you can simply apply online to the
IRS. You will still owe interest, but you wonít face a
penalty for ducking your responsibilities. If you can
pay everything within 120 days, donít file Form 9465,
McKenzie said. Instead, call 800-829-1040 and plan to
pay your taxes fully within 120 days. Then you will save
yourself the fee required with an installation plan.
you hide or skip payments and hope they will go away,
the results can be painful, McKenzie said. The IRS
computers can find your accounts. Agents can take your
pay automatically from paychecks, money in your
accounts, or even your home. If you are single, and they
go after your pay, you could be left with just $201 a
week for living expenses, McKenzie said. The IRS also
can tap your IRA.
you think agents wonít touch your home, think again,
McKenzie said. Heís seen a judge approve a claim by
the IRS to take a 70-year-old couple out of their house.
there can be alternatives if you are in discussions with
the IRS and show you are serious about paying. For
example, rather than losing a home, people could take
equity out of their home through a home equity loan, or
a reverse mortgage if over 65.
IRS is the toughest creditor you can find,"
McKenzie saud. Thatís why if you are in danger of
bankruptcy and canít afford to pay the IRS, using
credit cards is a better alternative than owing the IRS,
he said. Debts on credit cards can be wiped out in a
bankruptcy court, but bankruptcy doesnít free you from
the IRS, he said.