Money Mondays: Tax Tips For Procrastinators

Tom: Tax day is just around the corner. Do you have tips for those who have procrastinated?

Mellody: The annual late tax talk. Of course we have advice for last-minute filers. For all of you last-minute filers our there, the first thing to be aware of is the date change. The filing deadline in 2016 is April 18, not April 15. Under federal law, the tax deadline gets extended when it falls on a holiday or weekend, and Friday, April 15 is Emancipation day in Washington, D.C., so the tax deadline for most taxpayers will be the following Monday, April 18. For those states in New England that celebrate Patriot’s Day, an even later April 19 deadline will apply. You can breathe a little easier with those extra 3 days, and make sure you go over details and do things right.

Tom: What should people do if you are waiting to file because you cannot pay?

Mellody: You have to file your taxes, no matter what. Even if you cannot pay, should do collect all the paperwork, do your calculations, and file your taxes. Now, you may want to file for an extension, in order to buy some time. Anyone can file for an extension, but you need the paperwork by April 18 this year.

If you are going to have to file an extension, you can go online and find IRS form 4868, which will request the IRS to allow you another 6 months to finish. However, if you do file for that extension, you must make sure that you submit your taxes before October 15.

I want to be very clear though: you have to file your taxes, or an extension, by April 18 of this year. 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.

Tom: What if we file our extension, and we still don’t have the money?

Mellody: The first step is to pay as much as you can. If you file for an extension because you don’t have all of the money, pay as much as you can afford. If 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 that is not an option, the IRS also offers installment plans. This requires you to pay a fee to sign up, but will let you to pay in smaller monthly amounts. These plans require approval, and must be completely paid off within 3 years.

Finally, you should know that if you are owed a refund, you won’t be penalized for not filing. However, Uncle Sam will not send you your refund until you file your taxes. And if you keep missing tax day, you won’t get your refund back, period. If you ignore April 15 for three straight years, the IRS will keep your money.

Mellody: This is a great question. Many people have it in their head that if you file late or if you file for an extension, your likelihood of getting audited goes up. From what most experts can tell, it’s an old wives tale. No one knows how the IRS selects its audits, but we do know that certain things can flag your return for further investigation. From what we know, an extension might actually decrease your chances of getting audited, as it demonstrates you’re are taking the time to ensure that things are done correctly.

On the other hand, what will get you audited is not filing your tax returns, not paying what you owe, and not asking for an extension.

Tom: Are there any scams out there that are targeting late filers?

Mellody: The two most common scams that impact late filers are phone scams and phishing scams, as they prey on people’s anxieties about taxes and filing late. Phone scams tend to be calls from individuals who impersonate IRS or other government bureau staff. Phishing scams also play on anxieties. Both of these types of scams are primarily targeting your personal information, but can also seek financial transactions. The scam artists threaten taxpayers with police arrest, license revocation, and other things if you do not pay them or turn over information. Just remember, the IRS will never call or send taxpayers an email. Most primary information from the IRS comes in the form of snail mail, so don’t click on the links or provide your information over the phone to anyone claiming to be from the IRS.

 Tom: thanks for joining us, Mellody.

Mellody: You are welcome, Tom!

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