As we get close to April 15th (well April 18th this year), I want to talk a little bit about what you should do if you cannot file your taxes on time or if you can’t pay what is owed. The nice thing is that the filing of the return can be extended.
IF A RETURN IS EXTENDED, WHEN IS IT DUE?
- 6 months from now or October 15.
- Now you don’t want to wait that long to get it filed – filing it as soon as possible is still a good idea.
AND IF I REMEMBER RIGHT, THE EXTENSION IS FOR FILING ONLY RIGHT, NOT PAYMENT?
- Correct, if you owe tax, that still needs to be paid by the due date.
- If it is not paid, the IRS and states will charge interest.
- They may even charge you a late payment penalty.
- So you want to get the tax paid.
WHAT IF A PERSON CANNOT PAY THE TAX OWED?
- Don’t panic
- File the return even if payment cannot be made.
- Avoids the late filing penalty
- Pay what you can
- Contact the IRS to set up a payment schedule
- They will contact you also
- Go to the website and apply for an online payment plan (or installment agreement).
- You can set up a short-term plan (120 days or less) or a long-term plan.
- They may reduce or eliminate the penalties – not the interest.
WHAT SHOULD BE DONE THIS TO AVOID THE SAME PROBLEM?
- Adjust your withholding by having your employer take out more in tax.
- Set up estimated tax payments.
LASTLY, EVEN THOUGH YOU FILE AN EXTENSION, THERE ARE STILL THINGS THAT NEED TO BE DONE BY APRIL 18TH RIGHT?
- Fund a traditional or Roth IRA for last year
- Fund your health savings account for last year
Be sure to talk to a tax professional if you have any questions about filing extensions.