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.