APRIL 15 is an annual anniversary of sort – tax deadline for some, a date to file extensions for most.
It has become a habit for those who procrastinate like you. I see the same taxpayers come to my office to file after April 15 year after year. It’s against their religion to break tradition. After four decades of counseling taxpayers, I look back at so many reasons why taxpayers don’t file on time – not having enough funds, missing tax documents, or having a refund anyway. Let’s discuss nine reasons why you should file on time.
1. File on time if you have items that you don’t want disturbed in an IRS audit.
2. You save a penalty for failure to file of 5% per month versus only ½% for failure to pay; therefore, it is better to file even if you don’t have funds.
3. You may also need to file early to apply for student grants, loans, or aids such as FAFSA.
4. You may need current tax returns for a loan application or loan refinance. Don’t miss this opportunity to lock in 3% to 4% interest rates for the next 15 to 30 years. We may not see these historically low rates again in our lifetime.
5. The statute of limitation for the IRS to audit your tax return expires after three years (five if you fail to report 25% of your income). The statute does not expire if you don’t file. They can get to you anytime, forever actually!
6. Filing on time facilitates offers in compromise or installment agreements. During decades of working with the Collection Division of the IRS, I have experienced an easier time settling accounts of compliant taxpayers, but not of delinquent ones.
7. Request an installment payment plan by filing Form 9465 if you owe taxes of $50,000 or less. Approval is virtually automatic for compliant taxpayers with liabilities of less than $10,000. The IRS has recently been more reasonable in evaluating and approving installment requests.
8. Installment sale reporting is automatic, but don’t use it if you don’t need it. You won’t be able to elect out of installment sale if you don’t file on time.
9. The Franchise Tax Board charges cost recovery and collection fees. These penalties stick if you ignore them, even if you subsequently don’t owe anything.
In summary: Unless you have better reasons, file on time. Do it for peace of mind. Do it to relieve stress. You’re going to file anyway. Good luck!
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].