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Last Minute Tax Tips & Strategies!

Monday, January 29, 2018   /   by Sean Zanganeh

Last Minute Tax Tips & Strategies!


Hello! It’s April!  You can’t put the inevitable off much longer.




Your 2008 tax return is due to the IRS by midnight Wednesday April 15, so get it done already!

But what if -- for whatever reason -- you just can’t?  Or what if you have a big tax bill, and thanks to the current economy, paying that bill seems like impossibility. 

Well don’t panic.  We’re here to help.

File Something

If you can't get your tax return completed by April 15th, then file for an automatic extension of time. 

Because here’s the thing -- you have to file SOMETHING to the IRS by April 15. Think of Uncle Sam as your little kid who just needs attention.  Throw him a bone and he’ll go away -- for a bit. Ignore him and he’ll make your life miserable. 

If you don’t file something, the IRS will whack you with a ridiculous failure to file penalty.  It’s 5% per month on any federal income taxes due. 

So if you don't file your tax return or extension by April 15, the IRS is basically going to charge you $50 per month on every $1,000 of taxes you owe.

That’s nuts.

So file Form 4868 -- Application for an Extension of Time to File. It will automatically push your deadline off until Oct. 15, and Uncle Sam will leave you alone for a few months.

Your favorite tax preparation software will walk you through the process or you can print out Form 4868 at irs.gov.

Big note though -- this is not an extension to pay.  You have to pay your tax bill with your extension. 

Although if you can prove undue hardship, or that you were affected by a federally declared disaster, terrorist act, or military action you may get an extension of time to pay. Call the IRS at , but don’t hold your breath.

So, send in your payment with your extension.

But what if you don’t have the money?

If you don’t pay the balance, you’ll be hit with interest charges and a penalty for failure to pay of ½% per month on the unpaid balance (up to 25%) until the taxes are paid.

So make arrangements to get the IRS its money.

Payment Options

The old answer used to be to try to borrow the money from friends or family. But in this economy, who has extra money to lend you?

And again, under different circumstances, many tax experts would suggest taking out a home equity loan to pay the bill, but loans are a bit harder to come by these days.

So here are two more options.

1) Charge it

Believe it or not, you can use American Express (AXP: 15.09, -0.22, -1.44%), MasterCard (MA: 172.34, -1.04, -0.6%), Visa (V: 59.4, -0.657, -1.09%) or Discover (DFS: 6.57, -0.19, -2.81%) cards to pay your bill.  Now, you can clearly see the dangers here, especially if you already have big balances on your credit cards. But if you don’t, it may be an option. 

The IRS works with two different processors:

Just go to either site and follow the instructions. The sites will charge you a convenience fee based on the amount of tax you owe, so check the sites for details.  And of course know that you are still responsible for all the applicable credit card interest and fees.

The upshot: Some extra airline miles.

2) Get on a payment plan

If you don’t want to charge your bill, you can ask the IRS to put you on a payment plan. 

Then you can pay your tax balance in equal monthly payments over a specified amount of time.

Apply for an IRS installment agreement using the Online Payment Agreement application on IRS.gov or just attach a Form 9465 -- Installment Agreement Request, to the front of your tax return.

The IRS charges a $105 fee for setting up an installment agreement, though the fee is only $52 if you agree to pay your bill via direct debit.

You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid.

Once your request is submitted, the IRS will let you know within 30 days if it’s approved or denied, or if additional information is needed.

So while neither option is ideal, it’s better than paying additional interest and penalties.

So be sure to file SOMETHING on April 15 and make arrangements to pay your tax bill.

And you’ll get Uncle Sam out of your hair -- for now.

 
Tracy Byrnes

FOXBusiness