SKIP: It is that time of year again – tax time – and you have a few things for us to think about, correct?
MELLODY: That’s right, Skip. Wednesday is April 15, a day everyone knows but one that can cause anxiety and stress if you are uncertain about things or if you haven’t prepared. So this morning, I want to talk about a few things to remember if you haven’t yet filed or are not sure how you are going to pay. I want to make sure that everyone avoids penalties or any other mistakes!
SKIP: That sounds great. First things first: what do you need to know if you can’t pay?
MELLODY: The most important thing to remember is that even if you cannot pay, you still have to file taxes. Anyone can file for an extension, but you still have to submit the paperwork, which is due on April 15. By filling out IRS form 4868, the IRS will allow you another 6 months to finish. You just have to make sure that you submit your taxes before October 15. If you want to do this, you can file for a free extension through IRS Free File.
I cannot reiterate this enough though, Skip: you have to file. Failing to file your taxes is a very big deal. If you simply ignore tax day and don’t file or apply for an extension because you cannot pay, the IRS will charge you a failure-to-file penalty, which is usually 5% of the unpaid taxes for each month your return is late, up to 25% of your bill.
SKIP: Alright, so make sure you file. And what about the money though?
There are a number of options here. If you request an extension because don’t have the money necessary to pay, file your taxes and pay as much as you can afford. If you do this, and you only need a little time to come up with the rest, you can request a short extension of 60 to 120 days. You will be charged penalties and interest, but at a lower rate than you would if you are outstanding, and or file late.
If you cannot come up with the amount owed in under 4 months, the IRS also offers installment plans. This requires you to pay a fee to sign up the program, but will allow you to pay a certain amount each month. The IRS has approve the plan, and you still have to completely pay off the amount owed within 3 years.