The US tax deadline is approaching. We’re just one month away. If you haven’t filed your taxes by this point it probably means: (1) you owe taxes (and you’re waiting to pay at the last minute), or (2) you’re a procrastinator, or (3) you don’t have enough information. If you’re in one of those last 2 categories then here’s how you should approach this year’s filing:
File an Extension Using Form 4868 for an Automatic 6 Month Extension. This gives you until October 15th to file your tax return NOT pay your taxes.
You can print the form and mail it following the directions on the form or use FreeFile to file the extension free electronically.
This will save you up 25% or the 5% per month failure to file penalty on the tax debt amount. If you owe no taxes (but rather a refund) there will be no penalty assessed.
However, if you don’t file, you cannot get a refund (if due) and you only have 3 years to file a return in order to get a refund.
Pay all or up to 90% of taxes owed (if you owe taxes). In fact, if the IRS does not get 90% of your estimated taxes owed on April 15th, the failure to pay penalty of .5% compounded monthly will take effect on the tax debt amount.
Whenever the failure to file and pay penalty intersect in one month the total combined penalty is reduced by by the failure to pay penalty. If you cannot pay 90% of what you owe read situation 1 above.
Bottom-Line: If you cannot file your tax return on time, file an extension, instead of not filing anything at all. You can save up to 5% per month on any balance unpaid.
Even if you are owed a refund, when you file you can lock in credits and deductions that will lower your tax liabilities instead of waiting for the IRS to file a return for you (which eventually will happen and they will not include all deductions and credits).
Learn more about filing your taxes for free this year.
This is an article from Matt Robinson at TaxDebtHelp.com. Matt has been helping Federal and state taxpayers find IRS tax debt relief for over 10 years now. His firm focuses on on tax debt solutions and has constructed a new self-help site for taxpayers to resolve minor tax problems.