FOR quite a few taxpayers who have deferred on filing their 2010 income tax returns, the deadline is just by the corner. The most prudent action would be to file your income tax return before the October 17th deadline to avoid additional penalties and interest owed.
Remember, your tax payments would have been due on April 18th, whether or not your tax forms have been completed or not. If you filed an extension, ensure that you remain compliant with the extension deadline. Yes, interests will be assessed but they’ll be much less than if you would have to pay on additional penalties and interests should you file beyond the extension date allowable.
The IRS imposes a minimum filing penalty of .5%, and a maximum of 25 %, of the unpaid taxes not paid on the due date for each month your taxes are not paid. Sending even a minimum payment will help ease the exorbitant penalties and interests.
With this in mind, you can easily accumulate hundreds and thousands of dollars in unnecessary fees and penalties. I have witnessed a client paying approximately $4,000 in penalties and interests on a 1099 income originally valued at about $900 (that’s income, not tax due) 3 years prior to IRS discovering the unreported income.
However, paying 90% of your total obligation would allow you to have your penalty waived by the IRS but that doesn’t absolve you from paying the interest.
Let’s face it: the reality is that nobody likes paying taxes. We all despise taxes to a certain extent, but no one is exempt from messing with the IRS on taxes. But don’t get me wrong, the IRS is not the agency classic for punishing its taxpayers, as we all have preordained to believe. You could actually negotiate given the hard economic times we are experiencing.
If you can’t pay your taxes on time, you have options in paying your dues. As rigid as it seems, these are better alternative solutions than ignoring the deadline at all.
-Pay as much as possible on the due date. The old dictum goes, “the more you pay, the less penalties and interests you have to pay”. Spare that remittance to the Philippines this month; pay the IRS instead and reap the reward.
– Get a short-term (120 day) extension. A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.
– Pay by credit card. The IRS accepts credit card payments for convenience.
– Pay by agreement or installments. Check with your tax professional how to go about this.
While focusing on IRS, the Franchise Tax Board (FTB) should not be overlooked at all. Missing to file your state tax return could put you on the hook for stiffer fines and penalties as well. Now is the time to file your tax returns and it should be done ASAP. Don’t procrastinate!
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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323) 550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).
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Note: Evangeline is not an attorney nor does she provide legal advice. She is a bonded and registered Legal Document Assistant and prepares legal documents per the specific direction of clients.