According to federal law, your 2013 tax return is due today -- April 15, 2014.
Unfortunately, many Americans won’t comply with the deadline. We have innumerable reasons, including the normal human behaviors of procrastinating and trying to avoid bad news as long as possible.
I certainly sympathize with those sentiments. In fact, I should have posted these “Tax Tips” columns weeks ago, but I didn’t. I just didn’t want to think about taxes. On April 13, I finally got around to posting a “Tax Tips” column about how to write off uncollectible bad debts on your tax return. That blog is here.
Since I was so far behind in giving tax tips for your 2013 tax returns, I intend to make up for that in the coming days by writing tax tips columns that are applicable to your 2014 tax returns. Famous last words. I’m either late or 11-plus months ahead.
In any case, I have chosen today, April 15, to post a blog on what to do if you can’t pay your taxes or complete your tax return on time.
Tips If Your Tax Returns Or Payments Will Be Late
1. Change The Deadline: Ask the Internal Revenue Service (IRS) for an extension. Believe it or not, the IRS routinely grants automatic six-month extensions -- and it doesn’t require an explanation. But the IRS is not doing this out of kindness as other tips on this list prove. Form 4868 is the automatic extension request.
2. Send A Check With That Extension: "Extra time to file is not extra time to pay," the IRS reports. Consequently, you should send a payment with your request for a six-month extension. How much? The IRS wants you to estimate what your final bill will be when you complete your tax return between April 16 and Oct. 15 and send that amount. If your estimate turns out to be too low, you will be charged interest on the unpaid amount. I’ve looked for the rules on what happens if your estimate is too high, but curiously couldn’t find that information.
3. Pay What You Can: Who’s kidding whom? Many of us can’t afford to pay the tax bill. Nevertheless, the IRS wants you to file your tax return on time if you have completed the return, but just can’t pay the bill. Filing on time allows you to avoid a financial penalty for filing late. This penalty is HIGHER than the IRS penalty for not paying every dime you owe. I capitalized “higher” because this fact still astonishes me. Does the IRS really get upset if you’re a week late? Apparently, the answer is ‘yes.’
4. Seek A Payment Plan: The IRS reports that it will “work with you” if you can’t pay your tax bill because you’re experiencing financial difficulties. The agency really is a sweetie pie. You can also work with the IRS on a payment plan. Two of the options are filing Form 9465, the Installment Agreement Request, and using the Online Payment Agreement on the IRS website -- IRS.gov.
5. Borrow Money: Yes, the IRS recommends that you get a loan or use a credit card to pay your tax bill. You can tell from this recommendation that the IRS considers being paid VERY important. The agency’s logic, though, is sound because its penalties and interest for not paying your tax bill on time is often more than what your bank or credit card company charges you for fees and interest.
6. Ignoring Bills Isn’t Bliss: The IRS urges people to “contact the IRS right away” if you receive a tax bill that you can’t pay. Ignoring a bill, the agency reports, could lead to “collection action.” The IRS has a job to do, and it often isn’t nice about doing its job.
Coming Soon: How Self-Employed People Should Plan Their (Quarterly) Tax Returns.
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