The deadline for your federal income tax return looms large on the horizon. We are starting the countdown and sounding the alarm. If you have not yet filed, you have less than thirty days to figure those deductions and file those forms. The deadline is approaching fast.
How To Bravely Face the Deadline
Please do not avoid your tax issues. The deadline, the tax and your fiscal condition will not disappear if you put on blinders or wear rose-tinted glasses. Also, we suggest you re-read our previous blog on special tax problems, including bitcoin and recent tax scams.
In the words of Dave Ramsy, “You must pay any taxes owed. Face the issue head on so you can get the mess cleaned up. Then make sure you’re never in that position again.”
Last week we talked about procrastination and your tax obligation. This week we hope to add more insight to your impending “last minute” situation. We also hope to share some tips for maintaining your mental health during the taxpaying season, no matter what your situation might be.
The Deadline and the No Money Blues
So, what can you do if you have figured your taxes, but you know you do not have the money to pay them. You’ve got the I Can’t-Afford-To-Pay-My-Taxes-Blues.
Tax Tip 1: File on Time!
Many taxpayers do not understand that you must file your income tax on time, by the deadline, even if you cannot manage to pay your taxes on time.
(In this situation, we also recommend you do not do this without the assistance of a professional. Experts in the tax squad at Gavrilov & Co. can help. Come see us.)
Did you know that the penalty for not filing your taxes can be almost a dozen times harsher than the penalty for not paying your taxes?
So, get with a pro, do your forms, and file. Believe it or not, a pro might find some deductions or tax credits that will actually reduce that bill.
If you’re stressing out over the filing date and lack of funds, continue to read and see tip 2, below.
Tax Tip 2: Pay as much as you can when you file.
When you file, if you are short of funds, pay what you can up front. This shows your good faith. Have a garage sale. Save up for as long as possible, so you can pay a tidy chunk of what you owe, as you turn in your paperwork.
It helps to remember the words of John Wayne, “When you come slam bang up against trouble, it never looks half as bad if you face up to it.” Now, progress tip 3, below.
Tax Tip 3: Keep paying the taxes you owe even after you file.
Did you know you will have 30-60 days before the IRS contacts you about the rest of your taxes owed? According to Dave Ramsey, you should, “During that time, keep throwing every available dollar at the balance with the goal of paying it off before they ever contact you.”
If two months won’t help you coral all the dollars needed, did you know you that the IRS will work with you? Are you aware they might find an equitable monthly installment plan? In spite of what you might have heard, your tax difficulty does not have to end in a horror story of garnishment and tears.
Tip 4 How To Avoid The Big Tax Penalties
As we have stated, getting your return filed on time is the first step to avoiding the dreaded late-filing fee. Keep in mind you are filing for time to get that paperwork done. Therefore, you might consider filing for an automatic extension. Here are a few encouraging hints about your options, based on recent CNN Reports :
- The IRS probably won’t charge you for a late fee if you file for an extension with 90% of your payment. Then do the left-over 10% by your extended filing deadline in October.
- If you are going to be late in paying what you owe, remember to pay the most you can because the amount you do not pay will cost you interest. So you want to carry the very smallest balance possible.
- Use these helpful links from the IRS:
IRS.gov Forms, publications and helpful information on a variety of tax subjects are available at this reliable source.
Also, try these specific links you might need. Get your information straight, and you can relax:
- Form 9465, Installment Agreement Request (PDF 100K)
- Form 1040-V, Payment Voucher ( PDF 72.2K)
- Also, Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return ( PDF 165K)
The great Margaret Mitchell, the author of “Gone With the Wind,” stated, “Death, taxes and Childbirth, there’s never a convenient time for any of them.
A Special Sidebar: What about My Refund?
If you think you have a refund coming, you will endure no late fee for filing late. However, be certain of your figures. If you are wrong, the IRS will pile on several punitive charges. And, if you have not filed in three years, forget about it. That’s Uncle Sam’s statute of limitations.
The Darkside of the Ugly Truth
There’s just no way to put this prettily. You need to know the truth about those Punitive charges if you do not file on time:
CNN summarizes it this way,
- “If you’re more than 60 days late, you’ll be subject to a minimum charge of $205 or 100% of the unpaid tax, whichever is less.
- That minimum is meaningless, however, if the 5% per month you’ve been charged adds up to more than $205.”
- They add, “The late filing penalty amounts to 5% of your unpaid tax every month or part of a month that it goes unpaid.
- That charge will accrue for up to 5 months, capping the penalty at 25% of the unpaid amount.”
Tip 5: Honoring the Deadline Helps Your Case of Reasonable Cause
You’ll have a chance to make your case for Reasonable Cause, which will help you avoid penalties. The IRS will not penalize reasonable cause cases. But, they also do not publish what they consider to be reasonable. That is a matter of case to case applications.
We hope you will work with respected tax experts, who will help you with tax planning. Next year, you will have no problem around the deadline time.
Your tax expert will show you how to save time, money and stress to cover your tax needs. Think of it. You could be calm, relaxed, and self-satisfied. You’ll be thinking like Oliver Wendell Holmes, Jr., who said,
“I like to pay taxes. With them, I buy civilization.”
Without getting overtly political, we leave you with a clever thought from Winston Churchill who said,
“We contend that for a nation to try to tax itself into prosperity
is like a man standing in a bucket,
and trying to lift himself up by the handle.”
Thank you for reading the Gavrilov & Company blog.