Inevitably, there will be some taxpayers who were not able to meet the Tuesday, April 17 deadline for filing their income taxes. Here are some tips for minimizing the damage:
File as soon as is practical: People often wonder whether they should file their federal income tax returns if they think that they do not owe anything or if they do not have the money to pay the taxes that are due. Usually, it is a good idea to file the return in both of these instances. This is because there are benefits to filing your return, even if you cannot pay the taxes, as it can help to avoid penalties and can also begin running the statute of limitations. However, if you avoided filing because you think you may have an issue, it is usually a good idea to speak with a knowledgeable tax professional first.
Take advantage of e-file and Free File: IRS e-file is available to most taxpayers through the extension deadline, October 15, 2012. Taxpayers with income of $57,000 or less will qualify to file their return for free through IRS Free File. For people who make more than $57,000, the IRS offers Free File Fillable Forms. There is no software assistance with Free File Fillable Forms, but it does the basic math calculations for you.
Pay as much as you can when you file: Taxpayers who owe tax should pay as much as they can when they file their tax return, even if it is not the total amount due. They can then apply for an installment agreement to pay the remaining balance.
Request an installment agreement: Taxpayers who wish to set up a payment agreement with the IRS can file a File Form 9465, Installment Agreement Request or apply online using the IRS Online Payment Agreement Application available at irs.gov. As part of its “Fresh Start Initiative,” the IRS has recently announced that the threshold for requesting an installment agreement without having to supply the IRS with a financial statement (Forms 433-A , 433-B or 433-F) has been raised from $25,000 to $50,000. Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the previous 60-month maximum. Taxpayers seeking installment agreements exceeding $50,000 will need to supply the IRS with a Collection Information Statement. It is usually a good idea to speak with a tax professional when seeking an installment agreement, especially if a Collection Information Statement will have to be submitted.
Late filers should be aware that they may be charged a penalty for filing after the due date and those who did not pay their entire tax bill may be charged a late payment penalty. However, getting the matter handled in a timely fashion will usually help to mitigate some of these consequences.