Today is the final day to timely file your tax return. Over the past several weeks, emphasis has been made on the importance of filing your taxes.
People who cannot pay the tax they owe will often not file their return in hopes that the IRS will not notice. What makes not filing your return so bad is that the IRS isn't timely in "noticing" you haven't filed. You will receive a notice, maybe six to 18 months down the road, at which time the Failure to File penalty has compounded into a hefty sum.
Over the past several days I have been asked by those who owe what happens if they don't file their return.
First, you will be slapped with a failure to file penalty. If the IRS determines that you owe, you receive a failure to pay penalty as well. The failure to file is reduced if you also have a failure to pay penalty.
These penalties begin at the time the return was due, which this year is today, April 17. They accrue every month your return is not filed or your tax liability is not paid at a monthly rate of 5 percent of the tax due, up to a maximum of 25 percent. However, interest continues to accrue until the tax is paid.
There are options if you cannot pay. This year the IRS has the Fresh Start Penalty Relief Initiative. It applies if you are unemployed, or you were unemployed for at least 30 days, between Jan. 1, 2011 and April 15, 2012. You must submit Form 1127-A by the filing date. Interest will accrue, but no penalties will be assessed if paid by Oct. 15.
If the taxpayer agrees to pay in full within 120 days of April 17, interest will accrue but again, no penalties assessed. The taxpayer must call the IRS to request this method. The phone number is 800- 829-1040. Be prepared to wait for a while to talk with an IRS agent.
If you owe less than $50,000, you can request a three- to five-year installment agreement. Interest will accrue and late penalties may be assessed. There is an application fee of $105 which can be reduced if your payment plan is direct debited from a checking or savings account. You must submit Form 9465, Installment Agreement Request, to choose this option. This form can be submitted online for faster processing.
If you owe more than $50,000, you can request a three- to five-year installment agreement using Form 9465-FS, but you must also submit Form 433-F, Collection Information Statement. This form provides the IRS with information concerning your current financial situation.
These options are available if you have filed your return. You can easily file an extension free online or through a paid tax preparer. Don't delay.
For more information regarding filing an extension, visit www.irs.gov. The instructions to file an extension are on the home page.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at firstname.lastname@example.org