Before you file your taxes late, make sure you file a request for extension. Although it may require you to estimate and pay your taxes, filing an extension will allow you until October to finalize and file your tax return. The advantage to doing this, is it will help you to avoid the large penalties for failing to file your return.
Why do we procrastinate when it comes to tackling our tax returns? Maybe we are worried that we won’t file them correctly, so we put the task off. Or perhaps we are waiting for the last minute pressure to force ourselves to complete the task. Once we have filed late, we may figure that filing on time might signal something to the IRS and raise the possibility of an audit. Although there is no real justification for this way of thinking, it is another opportunity for the procrastinator to push off his tax filing until the last possible minute.
Some citizens are automatically granted extensions, even if they don’t formally request one and are not procrastinators. Among those given additional time are people affected by certain natural disasters and active military, depending on where they are stationed and if they are in a combat zone.
If your intention is to file a request for extension, look carefully at the IRS website for filing extensions to understand tax penalties.
If you are going to owe taxes and are going to file a request for extension, with the intention to file your taxes by the final extended date in October know that the late FILING fee can be ten times higher than the late PAYMENT fee. Getting the request for extension paperwork filed on time will save you the late filing fee. Since you are filing to extend your tax return, you are supposed to determine how much your taxes will be in advance of the filing extension (by the April filing date) and pay them. If you don’t pay them by the April 15th deadline, you will have to consider the late payment fee. Although the IRS does not expect them to be estimated perfectly, they do expect you to send at least 90% of the total owed (they allow a margin of error of about 10% of what you may owe and expect that you will send the balance when you file.)
The IRS has developed a Profit and Loss form, particularly for small business owners who seem to be the most likely candidates to file late. This way a tax filer can estimate how much in taxes he or she may owe and be prepared to pay, with some degree of accuracy, by the tax deadline.
There is even a payment extension form (IRS form 1127) you can file if you might qualify for financial hardship and find it difficult to get that estimated payment in.
Interest and late payment penalties will be collected if you ask the IRS to postpone your payment temporarily. This is called a Temporary Delay in the Collection Process. And last but not least, for those who have been delaying or avoiding paying and want to now settle up with the IRS, there is an Offer in Compromise which might help give those “eligible taxpayers with a path toward paying off their tax debt — a fresh start.” There is a hefty application fee, which must be paid, but it may in fact, be worth it, depending on the size of the tax bill owed to the government.
In general, the advice of a tax professional or attorney might be helpful in applying for and getting your Offer in Compromise, which results in reaching an agreement with the IRS to pay less than the full balance of taxes due.
For a helpful checklist including ways to reduce or avoid some penalties, visit https://www.e-file.com/checklists/filing-taxes-late.php