Are you a tax procrastinator? Then you’re part of a non-exclusive and expensive club. A
survey by TechBargains.com
found last-minute income-tax filers pay nearly double over those who
file earlier in the year. That’s better, however, than those who file
late or don’t file at all.
The IRS makes a significant distinction between taxpayers who fail to
file and those who fail to pay any outstanding tax debt. The penalty for
“Failure to File” is more expensive, at 5 percent of the outstanding
tax bill per month until the return has been filed. Though this amount
is capped at 25 percent, other penalties like “Failure to Pay” may come
into play, charging an additional 1 percent of the outstanding tax bill
per month.
So what can you do to avoid these fees and headaches?
When Filing Electronically
There’s a selection of cheap and easy online tax software, like
H&R Block,
TurboTax or
those linked to on the IRS site.
Even if you owe money you can’t pay, file now to avoid fees. Then
contact the IRS to figure out a payment plan or fill out the
Installment Agreement Form for the outstanding debt.
When Filing By Mail
You can still file and pay on time, if your forms are postmarked with an
April 17 date, so hoof it down to the post office by the close of
business on Tuesday. Don’t put it off until too late, however, as the
lines can be overwhelming.
When You Should File an Extension
If you have a complicated tax return or find yourself in a new financial
situation, consider filing an extension to give yourself extra time.
You don’t want to miss any available deductions, so it pays to take your
time. File
Form 4868
for a six-month extension. Outstanding tax debt is still due April 17,
however, so pay as much as you think you owe to avoid the Failure To Pay
fee.
When You Need Payment Options
If you don’t have funds to cover the entire outstanding debt, the IRS offers
various payment options
and can work with you to set up a plan. You may qualify for a plan
under the recently launched Fresh Start Initiative, which offers an
installment agreement or a six-month grace period depending on specific
circumstances, including being unemployed, going through bankruptcy, or
owing over a certain amount.
Andrea Woroch is a nationally-recognized consumer and money-saving
expert who helps consumers live on less without radically changing their
lifestyles. You can follow her on
Twitter for daily savings advice and tips
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