Posted: May 07, 2009
Missed the tax deadline? Here’s what to do
Treat the IRS like your mother: Show you careBy Rick LaFave
There are an estimated 10 million people this year who didn’t file their taxes in time for the April 15th deadline. Are you one of these people, or does this apply to your small business taxes? If so, it’s very important that you act. It’s the same idea with Mother’s Day coming up this weekend – it’s best to show that you care!
The bottom line is that the IRS would rather hear from you – regardless of your ability to pay at the current time – than not hear from you at all. So even if you don’t have the money to pay your entire balance, you should file your return at the very least – and pay what you can. If you did not file a return before the April 15th deadline, you should have filed a six-month extension (Form 4868) that gives you until October 15th.
If you did not file this extension, you should probably meet with a tax professional and be aware of the penalties associated with filing late. There are two main penalties you should know about:
1. The Late Filing Penalty
The clock starts for this penalty on April 15th, unless you filed an extension. This fee is generally 5 percent of your total unpaid tax each month – meaning 5 percent after one month, an additional 5 percent after the second month, etc. This continues until the total amount is paid, or to 25 percent of your unpaid amount, whichever comes first.
You also could be subject to a minimum “failure to file” penalty 60 days after the deadline – on June 15th, for last month’s deadline. This fee is the total of your unpaid tax or $135, whichever is less.
2. The Late Payment Penalty
The IRS also starts the clock for this penalty after your extension expires or after your missed deadline. For the late payment fee, you will owe 0.5 percent of your total tax liability each month until the amount you owe is fully paid.
You should also be very careful about the interest you owe on your unpaid tax liability. These rates change each quarter, and it currently stands at 4 percent. Each day the total amount of your tax isn’t fully paid, interest will accrue on the remaining amount.
If you had a difficult time with your taxes this year, make a resolution that you won’t do this to yourself next time. There’s nothing wrong with filing late, but be sure to file an extension before your deadline.
We recommend that good tax planning doesn’t start in March, or even in February or January. It starts now: If you construct a tax plan that fits for your unique needs, tax day won’t sneak up on you next year. Instead, you’ll be prepared for the 2010 deadline – and you might save some money in the process.
Rick LaFave is a principal with H&R Block Tax & Business Services (formerly Vantive Partners) in Centennial. With 11 offices in the Denver area, H&R Block Tax & Business Services specializes in providing clients with a proactive approach to individual and business tax strategies. Visit www.HRBTaxandBusiness.com for more information.