Individual Tax Deadline
As 2017 starts to cool down, the deadline for extended individual tax returns fast approaches. The official date is 10/16/17, because the 15th falls on a Saturday and the government does not work on the weekends. If you have not already filed, try to find all your forms and breakout that box of receipts. We urge you to get your returns filed before the due date to avoid the generally larger Failure-to-File penalty. That penalty is normally 5% of your unpaid taxes for each month or part of a month that a tax return is late and starts to accrue the day after the due date.
What are your options if you file your taxes, but are unable to pay the entire amount due? Firstly, pay as much as you are able with the return. This will help cut down on interest and penalties that will begin accruing. Remember that a loan or credit card MAY charge less interest than the IRS, which might make those options for paying off the tax entirely. Note that extensions are only good for the filing of the return, not taxes owed. If you owe money, it was due on the April 15th deadline and the IRS will go back to that date to start accruing penalty and interest.
After you have paid what you can with your return, there are options for paying the rest back. The most common and most likely to be accepted would be an installment agreement. A Form 9465 will need filled out or if you owe $50,000 or less you can do it online. In filling out these forms, you will offer how much you will pay per month. It is recommended that you set the payment to an amount you can reasonably pay each month to pay off the tax as soon as possible to avoid further interest. You are allowed to pay in more than what you have suggested if you are able to later.
The other option is an Offer in Compromise. This is the last option and other options should be explored first before trying to set one up. To be eligible to request and Offer in Compromise, you must be current with all filings and payments. You will need to use the Offer in Compromise booklet, which will ask you to go through your personal and business finances, make an offer, and include an application fee. The offer must be reasonable as decided by the IRS and can be rejected.
If you would like to try and avoid paying a large amount with your tax return, making estimate payments are an option.
However, if you do not owe with your return, there will be not be a Failure-to-File penalty, because the government is fine with holding your money for you until you file. However, we highly encourage you to still file on time.
Give us a call at (260) 407-5000, and we can help you with coming up with realistic estimated payment amounts to help avoid Estimated tax penalties and Failure-to-Pay penalties.