Money Management - Tax filing, payment problems
Tax season is just around the corner. Few people look forward to it, but those concerned they may owe taxes approach this time of year with particular apprehension.
The Minnesota Society of Certified Public Accountants assures the public that there are options for those who need more time to file their returns or who are having trouble paying what they owe.
Getting an extension
If you don't have the information you need to file by the tax deadline, or will be delayed for some other reason, it's possible to receive an automatic six-month extension for filing your return.
This means that you will have until October to get your documentation to the Internal Revenue Service.
However, even if you receive a filing extension, the IRS will still want you to pay the taxes you owe by the April 15 deadline.
If you do not pay the amount due by the regular due date, you will owe interest and may be subject to penalties. Your certified public accountant can help you determine whether an extension is a good step for you and what payment amount you may owe in the meantime.
Don't fail to pay
What happens if you just can't pay the taxes you owe? The IRS may be willing to work with you in this situation, so it's important to get in touch with the IRS and discuss your options. Your CPA can explain your choices to you and work with you and the IRS to resolve the problem. Be aware that failure to file a return at all will, at a minimum, subject you to penalties, so this is never your best course of action.
Your payment options
If you just need a little more time to pay, you can ask the IRS for up to 120 extra days through an Online Payment Agreement available on the IRS website, www.irs.gov. You generally don't have to pay a fee for this arrangement, although you will owe penalties and interest for the late payment.
If you need an extended time to catch up, then you may need an installment agreement. Under such an agreement, you make monthly payments of a $25 minimum. Any future refunds for which you qualify will be used to pay off the outstanding debt.
There are fees associated with an installment agreement. These vary based on your income level and how the fees are paid. You can avoid the fee if you are able to pay your total outstanding taxes within 120 days.
You will still be expected to file your tax return on time and pay all future taxes in full and on time. The IRS generally doesn't enforce collection action against you if you are in the process of applying for an installment agreement or have one in place.
Get a fresh start
The IRS' expanded "Fresh Start" initiative is aimed at helping people who have lost their jobs and are having trouble paying their taxes as a result. The program offers a penalty grace period for some taxpayers who have been unemployed 30 consecutive days or longer.
Self-employed people whose business income fell 25 percent or more in 2011 may also qualify.
In addition, the IRS has recently begun offering more flexible terms via its Offer in Compromise program, including new penalty relief.
The program also widens the pool of people eligible for streamlined installment agreements in an effort to ease the burden of paying back taxes. Changes have also been made in lien practices. Ask your CPA for more details if you believe you may qualify.
A CPA can help
If filing your tax return or paying taxes due presents a challenge, be sure to turn to your local CPA. He or she can offer advice on all your pressing financial questions.
Don't have a CPA? Visit mncpa.org/referral to locate one in your area. You can also visit the MNCPA website at mncpa.org for great financial planning advice and tips.