Income Tax Extensions

Posted: May 26, 2012 in Uncategorized
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Did you miss this year’s 17 APR filing deadline. You are not alone. The IRS says 10 million of the 140 million Americans who file tax returns each year ask for extensions – and this year, Republican presidential hopeful Mitt Romney is one of them, according to The Washington Post. In fact, the IRS website http://www.irs.gov/businesses/small/article/0,,id=108326,00.html has an entire section called Filing Late and/or Paying Late. If you have not filed the following is germane:
1. Missed the deadline. While midnight 17 APR was the deadline to file your taxes, it’s also was the deadline to get an extension to file your taxes. A Form 4868 would have given you extra six months if you filled out the form correctly and sent it in by the deadline. U.S. citizens and residents are granted an automatic 2 month extension beyond 17 April if they are outside the United States or Puerto Rico on that date. If you intend to file during the two month period granted annotate the top of your tax form “Taxpayer Abroad” (temporary) or “Out of the Country” (you live outside the United States). It's important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who don't file a past due return or contact the IRS are subject to the following:
 Penalties and Interest will be assessed and will increase the amount of tax due. Expect a failure to file penalty of 5% per month of taxes due up to a maximum of 25% with minimum penalty is $135. In addition a failure to pay penalty (i.e. interest) of one half of 1% will be assessed. If you pay with an IRS installment plan, that cuts your penalty down to a quarter of a percentage point monthly. If you owe less than $10,000 and don’t have any other problems with the IRS, this is as automatic as the tax-filing extension. You’ll have to pay $105 to set up the installment plan, but that gets cut in half ($52) if you let the IRS take the money out of your bank account electronically.
 The IRS will file a substitute return for you. But this return is based only on information the IRS has from other sources. Thus, if the IRS prepares this substitute return, it will not include any additional exemptions or expenses you may be entitled to and may overstate your real tax liability.
 Once the tax is assessed the IRS will start the collection process, which can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.
 Even if the IRS has already filed a substitute return, it still makes sense for you to file your own return to make sure you take advantage of all the exemptions, credits, and deductions you are allowed. The IRS will generally adjust your account to reflect the correct figures.
NOTE: Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions. Continued non-compliance by flagrant or repeat nonfilers could result in additional penalties and/or criminal prosecution.
2. You might be a special case. There are exceptions to every rule, even those written by the IRS. If you qualify for a program called Fresh Start, you get a penalty-free extension on actually paying your taxes. Even then, you will still owe interest. But you must fall into one of these categories:
 .Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to this year’s April 17 tax deadline; or
 Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.
 you’ve survived a natural disaster in the past year or you were on active military duty, you might also qualify for the same break.
3. Deadline not applicable. There’s one class of taxpayer that doesn’t have to worry about today’s deadline: those getting a refund. If Uncle Sam owes you, you won’t be penalized for filing late.
4. How you can avoid owing money on next year's return? Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out after completing their return that their withholding or Estimated Tax payments do not equal their tax liability. To help avoid this situation, the IRS can advise taxpayers how to ask an employer to withhold enough tax from their pay. For any income that is not subject to withholding, the IRS can provide information necessary to make quarterly payments to cover any amount to be owed. To make payments electronically check out http://www.irs.gov/businesses/small/article/0,,id=174251,00.html, or go to the EFTPS Web site http://www.irs.gov/app/scripts/exit.jsp?dest=https%3A%2F%2Fwww.eftps.com%2F. Changes in financial circumstances could have an impact on taxes. For example, an increase in income, divorce, or selling an asset, may require adjustments to withholding or estimated payments. By taking these steps, taxpayers will be better able to meet their tax obligations and avoid tax day surprises.
[Source: MoneyTalksNews Stacy Johnson article 17 Apr 2012 ++]

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