4/17/2012 4:15 AM ET|
It's Tax Day: What if you can't file?
There's no excuse for paying a late penalty if you can't file your tax return on time. You've got an alternative.
Today is Tax Day. What do you do if you know you can't file your income tax return on time?
You could simply ignore the problem and hope the Internal Revenue Service doesn't notice.
Uh . . . that's not a good idea. If you have filed before, the IRS will notice, and you will probably pay penalties.
You could always panic. Or you could use Schnepper's easy, short-term fix: File for an extension. It's a snap.
A 6-month reprieve with Form 4868
The IRS has a simple form that allows you an automatic six-month extension to file your taxes. It's Form 4868 (.pdf file), and it's easy to complete -- even without an accountant.
The form starts by asking for your name, address and Social Security number. It then asks you to estimate your tax liability and send any balance due. If you make this payment and cover at least 90% of your real liability, you win. You won't owe a late-filing or late-payment penalty.
You can use the IRS' Free File system online, pick up the form at any IRS office or order it toll-free at 1-800-TAX-FORM (1-800-829-3676). If you're using tax-preparation software at home, you can file by computer and receive an acknowledgement by email.
You must file it by the regular due date of your return. It is an automatic extension. You don't have to give the IRS any reason. You can get it even if the only reason you haven't filed is that you were lazy or didn't want to think about it.
Form 4868 gives you until Oct. 15 to complete and send in your return. But regardless of the form, if you think you owe money to the government, you must send it in by today.
You can ask for only one extension. So you really do have to file by Oct. 15.
The pain of penalties
It can hurt if you don't file for the extension. The IRS can hit you with a late-filing penalty of 5% of the tax not paid by the due date for each month -- or partial month -- your return is late. Generally, the maximum penalty is 25%. But if your return is more than 60 days late, the minimum penalty is $100 or the balance of the tax due on your return, whichever is smaller.
On top of the penalty for filing late, there is a penalty for paying late. This is usually 0.5% of any tax not paid by the due date. It is charged for the part of a month that the tax is unpaid. The maximum penalty is 25%.
The late-payment penalty can be excused if you can show "reasonable cause" for not paying on time. You are considered to have reasonable cause if at least 90% of your actual liability is paid before the regular due date of your return through withholding or estimated tax payments.
However, you'll owe interest on any tax not paid by the due date of your return. This interest runs until you pay the tax. Even if you have a good reason for not paying on time, you'll still owe the interest. Neither the interest nor the penalties are deductible.
If you're out of the country . . .
If you're a U.S. citizen or resident and were out of the country, you automatically get a two-month extension to file your return without filing Form 4868. But you still have to file by Oct. 15. "Out of the country" means either:
- You live outside the United States and Puerto Rico, and your main place of work is outside the U.S. and Puerto Rico.
- You're serving in the military (including naval service) outside the U.S.
For more information, see Publication 54 (.pdf form).
Jeff Schnepper is the author of the best-selling book "How to Pay Zero Taxes," which is in its 30th edition. He is a former professor of taxation, accounting and finance. Schnepper now has a full-time tax planning and legal practice in Cherry Hill, N.J. Click here to find Schnepper's most recent articles.
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