With April 17th just a month away, the True Resolve Tax Professionals in Denver provide a two-part look into last-minute tax return options for individuals. If you’re like millions of Americans, up to 25% of taxpayers according to the Internal Revenue Service, you’re likely to procrastinate down to the wire, the last two weeks before the deadline to submit your tax return on time.
If you’re filing a 1040EZ, this might not be such a big deal. But, most individual taxpayers are not in this boat. Perhaps, you own a home or a business or both. Maybe, you’re married, have children or play the stock market. It’s no secret that tax matters can quickly get complex. So, what are you waiting for? It’s time to make a decision – either file your taxes or request an extension from the IRS.
Today, let’s look at your first option, pushing out that due date for your taxes. In our next blog, we will discuss how to make a sprint for the April finish line.
Should I File an Extension with the IRS?
If you absolutely, positively need more time to get your financial affairs together so that you can file an accurate and complete tax return, an extension might be your best bet as far as last-minute tax return options for individuals. After all, nobody wants to have the IRS audit them over a senseless mistake or incomplete return. If you need the extra 6 months, be sure to send Form 4868 to the IRS by the April 17th deadline. You can even file an extension for free online.
Now, here’s the catch! If you think you’ll owe money to the Internal Revenue Service, filing an extension does not give you extra time to pay. They want their money, and they want it sent promptly in April. No matter the reason or your circumstances, if you don’t pay what’s owed by the standard due date, you’ll start accruing interest. Currently, the federal short-term rate is 3% and compounds daily.
You’ll also be subject to a Late Payment Penalty, which is one-half of 1% of any tax and charged for each month or part of a month your tax is unpaid. The maximum penalty is 25%. The IRS also has a Late Filing Penalty which is typically 5% of the amount due for each month or part of a month a return is late. The maximum penalty here is also 25%. If your return is over 60 days late, your minimum penalty is $210 or the balance of the tax due on your return, whichever is smaller.
What Happens If I Owe the IRS Money?
As you can see, filing an extension when you owe the IRS may not be the best idea. And what happens next is dealing with a government agency that has nearly unlimited powers to recoup what you owe.
You may face any number of invasive debt collection tactics, such as an IRS Lien which is a publicly filed legal claim against your assets that can devastate your credit score. Using a levy, the IRS can seize property, such as your home, then auction it off to cover your debt. They can even impose an IRS Wage Garnishment and take 70% or more of your income and apply it to what you owe. Bottom line, when it comes to last-minute tax return options for individuals, putting things off can make matters worse.
Now that you know the pros and cons of filing an extension, come back to read more about last-minute tax return options for individuals. Of course, if you need help with your extension or have any questions regarding tax returns or other tax problems, get in touch with the knowledgeable team at True Resolve in Denver. We’re here to help with all of your tax needs.