by Richard Schneider, CPA (inactive)
Winona State University
No, not the end of the world, I hope, but the end of the tax season. Just a couple of days to file, Monday, April 18th is the deadline. The reason it’s the 18th and not the 15th, is because of a holiday, Emancipation Day, in the District of Columbia on the 15th, which buys a three day reprieve for the whole country. Usually the 15th of April, means the end of long work days and weeks for those of us in the tax preparation field, and panic for a number of taxpayers, who haven’t even started their tax returns, even with a solemn resolution after the panic last year that 2011 would be different.
So here it is the 15th, 16th, 17th, or even the 18th, and you are nowhere near being ready to file, or you cannot get an appointment with your tax preparer, what do you do? First I would look at last year’s tax return, did I have a refund or have to pay in? Was 2010 the same or similar to 2009, in income and withholding, if not was there more or less income, and/or withholding? The bottom line here is you are not going to file your return by the 18th, and want to know how to get an extension to file. IRS form 4868 is used to apply for an automatic extension of 6 months, this year to October 17th, 2011, that’s right October 17th. Where can you get this form? If you use a professional preparer, they will normally prepare this for you upon request, and add something to your bill when you’re return is finished. You can down load a form from the IRS web site, IRS.GOV.
What happens if you fail to file your return by the 18th, and also fail to file form 4868 for the automatic extension? There are two penalties that could apply. The first one is ‘Failure to File Penalty’, which is 5% per month, of any amount of tax due on the return, up to 25%. You can attach a statement to your return stating the extraordinary circumstances that caused you not to file on time, or file an automatic extension; if acceptable to the IRS the penalty will be abated. A good excuse may be taken hostage, hospitalized, or being in a disaster area and having lost your records.
The second penalty is the ‘Late Payment Penalty’, which is .5% of tax due, for each month you’re late. On top of these there could be an Under Payment Penalty. You will note all of the penalties are computed on the additional tax owed with filing. If you have a refund coming there is no penalty, even if you failed to file form 4868. When you file a 4868 to get an extension, this is an extension to file, not an extension to pay your taxes. If you owed an amount last year and you did not change your withholding, or make increased estimated payments, chances are you will owe tax this year also, and should pay in something when you file form 4868.
If you have not filed for several years, I would suggest getting this done. If you had a refund coming, you will forfeit this if you do not file within three years, of the due date of the return. If you owe tax, you limit the damage of penalties and interest. Failure to file and pay significant amounts of tax owed can lead to large penalties, and possibly jail time. Don’t listen to some of these kooks that insist it’s unconstitutional to require the populace to pay tax, or you may be sharing a cell with them.
To my fellow tax preparers, Tuesday the 19th, is coming soon, a day to golf, to rest, to sleep in, take in a Twins game, or just find a quiet place away from other humans. May you be blessed for all of your hard work, and wise words of tax and relationship advice. To my fellow taxpayers, congratulations to those of you who have filed, may you be blessed for your honesty, organized records and information, and kind understanding of the strain your tax preparer endures. If you have not yet filed, reread the first part of this article, and take time to meditate and/or pray, to determine right course of action.