An Extension of Your Tax Return Does Not Mean Extended Time to Pay!

Tax-filing extensions are available to taxpayers who need more time to finish their returns.  Note that an extension of your tax return does not mean an extended time to pay.  Filing an extension merely gives you until October 15, to file your tax return.  You will still need to pay an estimated amount of tax due or face late fees and penalties later.   Taxpayers who are having trouble paying what they owe may qualify for payment plans and other relief, so don’t delay filing merely because you won’t have the money by April 15.  Either way, you will avoid stiff penalties if you file either a regular income tax return or a request for a tax-filing extension by this year’s April 15 deadline.

Here are further details on the options available:

More Time to File

People who haven’t finished filling out their return can get an automatic six-month extension.  If you are one of our clients and your tax return paperwork was turned in too late for us to complete it by the April 15 deadline, we have already notified you and your extension request is being processed.  An extension will give you until Oct. 15 to file your complete return and make any adjustment to payment due, if any.

By filing an extension, you will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline.  In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15.  The interest rate is currently three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.

Some taxpayers get more time to file without having to ask for it. These include:

Taxpayers abroad…

• U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 16 to file.  Tax payments are still due April 15.
• If you’re a member of the military or others serving in Afghanistan or other combat zone localities, typically, you can wait until at least 180 days after you leave the combat zone to file your return and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces’ Tax Guide.
• People affected by certain recent natural disasters.

Taxpayers who have finished their returns should file by the regular April 15 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including the following:

Most people can set up a payment agreement with the IRS online in a matter of minutes.  If you are one of our clients, we will fill out the paperwork to set up payments for you.  If you do your own taxes, and you owe $50,000 or less in combined tax, penalties and interest, you can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months.  Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS.  With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the filing of a Notice of Federal Tax Lien if one was not previously filed.  Alternatively, taxpayers can request a payment agreement by filing Form 9465.  This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.  The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.  To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.  If you are considering an “offer-in-compromise” it may benefit you to consult with us.  It’s very likely that we can negotiate a better compromise for you. Give us a call for more details at 559.924.1225.

Details on all filing and payment options are on IRS.gov.