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| The Basics | It's April 15. Do you know where your taxes are?
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Tardy taxpayers beware; today is tax filing day. So get to work or ask the IRS to cut you some slack with an extension. But file something today.
By Jeff Schnepper
It's Friday, April 15, and you just woke up to the spring sun shining and the birds singing. All is well with your world until a sinking feeling of dread begins to churn your stomach as you suddenly remember what you forgot to do -- file your tax return!
Don't panic. Take a deep breath. I have two options for you to consider. Use one of them.
And don't be cavalier about it. If the Internal Revenue Service (IRS) can prove willful failure to file, you're subject to a criminal fine of as much as $25,000, and you can go directly to jail -- without collecting your $200. And as slimming as stripes normally look on you, all of a sudden fashion isn't as important as it used to be.
That's in addition to the civil penalty of 5% of the net tax due (that's the tax owed after credit for withholdings, estimated taxes paid and other credits on your return), per month, up to a total of 25%.
If the return is more than 60 days late (counting extensions), then the minimum civil penalty is the lesser of $100 or 100% of the tax due on the return. And that's just for not filing. There are additional penalties for not paying.
All of a sudden, you feel like your collar is two sizes too small . . . and you're not even wearing a shirt!
OK, now take another deep breath. MSN Money is behind you. Even the IRS is behind you; they would much rather have you file something today than nothing at all.
What to do
If youre stuck, here are your options:
Get that return done. If you can get your return done and postmarked by midnight, you've filed on time and once more you've escaped the bullet. Sharpen your pencils and get down to work. Find out which post office will be open until midnight. Give yourself time to get there.
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Now, get that return out and work the numbers on both the federal and state returns. Be sure to attach your W-2 and 1099 statements to each when you finish. If you have children under age 17, don't forget the $1,000 child tax credit.
Use our Tax Estimator to get a handle on your bill.
Don't forget to sign the returns. If you want to file online with H&R Block, click here.
Don't be concerned if you don't work well under pressure. If you make a mistake and miss a deduction, you have three years from the due date of your return to amend that return. (Which means April 15, 2008.) To amend your return, use Form 1040X. You can download it from MSN Money or from the IRS.
To access state income tax forms (if your state has an income tax), click here.
Despite rumors to the contrary, filing an amended return doesn't increase your chances of being audited. But you can help your cause. I recommend that my clients attach documentation to their amended returns to back up any additional deductions they claim. In fact, by showing the IRS that you understand the system and do have substantiation, you might actually decrease the odds of a full audit.
File for an extension. Use this option if you really can't get that return done and either dropped off at the post office or filed online today.
You do that by filing Form 4868 for an automatic extension. It's an easy form to complete. All you need to include are:- Your name
- Your address.
- Your Social Security number (and your spouse's if you're married filing jointly).
- How much you think your final tax bill will be.
- How much you've paid to the IRS so far.
- The amount of the check you're including with your extension form if you need to include a payment
You don't have to sign the form. So don't worry about that. (Your signature on your return takes care of the signature issue.)
You can also file Form 4868 over the phone. Just call (888) 796-1074. Make sure you have a copy of your 2003 return. The IRS will use details from it to verify who you are. Don't be surprised if the phone lines are busy on April 15. If that's the case, file for the extension by mail.
A last note: If you file for the extension over the phone, you'll still need to attach the form to your federal and state returns when you file.
More time to file, not to pay
You'll also have to estimate your final tax liability and pay, with the extension request, any additional tax due. This is an extension to file, not to pay. If you overpay, you'll get the balance back as a refund.
You can use Form 4868 to eliminate the failure-to-file penalties. Even if you're off on your tax estimate, if the balance of the tax actually due is remitted when you finally file your income tax return, there won't be any failure-to-file penalties unless the unpaid amount is more than 10% of your total tax bill.
For example, assume your total tax liability is $10,000. So long as you don't owe more than $1,000 (10%) when you file, there won't be any failure-to-file penalties. So, when you estimate the net tax due, estimate carefully.
If you file Form 4868 by midnight tonight, the IRS must give you until Aug. 15 to file your return. (And, by the way, most states will also honor the extension request.) That gives you four more months to actually get your tax return done. Make sure that you obtain proof from the post office that you mailed your extension request on time. (You can do that by sending the extension request in by certified mail.) You always have the burden of proof that you filed on time -- even for extensions.
And if you can't make that . . .
Now, what happens on the morning of Aug. 15, which is a Monday, when you wake up to the same feeling?
First, smack yourself for having so little self-discipline. Then take yet another deep breath. You've got one more chance to avoid interest and penalties.
The IRS and many states offer you a second extension, until Oct. 17. (That's because the normal deadline of Oct. 15 falls on a Saturday. You apply for this extension with Form 2688.
But this isn't an automatic extension. To get this one, you have to give the IRS and your state a reason why you're late, and it's entirely within their discretion to accept or reject your reason. It is quite possible, in fact, that the IRS will grant you another extension, while the state won't.
Reasons that haven't impressed the IRS include, "I haven't gotten around to it yet," and "My dog ate my tax forms."
I've never had a request denied when my clients have been waiting for a late 1099 or a late K-1. If you have a reasonable explanation, use it. If not, then you probably had better have some 1099 or K-1 income on your return.
What happens when you wake up on Oct. 15 with the same feeling? Don't ask me. I'm an accountant and tax attorney, not a psychiatrist!
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