Posts Tagged ‘tax return’

Failure to File and/or Pay Taxes

Most people know April 15th (April 17th in 2012) is the due date of your individual income tax return.  You may request a six month extension allowing you to file your return by October 15th without penalties.  However, if you fail to request the extension timely or if you don’t file your return by the extension date, you may be subject to late filing penalties.  The penalty is 5% (on the net amount of tax due) for each month not filed up to 25%.  If the return is more than 60 days late, the minimum penalty is the lesser of $135 or tax due.  Interestingly enough, there is no penalty if the return shows a refund.  I suppose this is because the IRS would be happy to keep your money, and the only way you can get it, is to file your return.

We remind our clients that even though the IRS will grant you an extension to file your return, the extension does not allow you more time to pay taxes.  You must pay your taxes on time.  Don’t ignore it because it will only get ugly!  You can set up an installment agreement with the IRS to pay your tax over time.  While it won’t eliminate the fee, they may reduce the rate by 50%. 

The failure to file timely penalty is 5% per month to a maximum of 25%.  The penalty for failure to pay timely is also 5% per month.  However, both penalties do not apply on the same liability.  If you are subject to both penalties in the same month, the failure to file penalty will be reduced by the failure to pay penalty.  (Aren’t they so kind?)  However, the entire time these penalties are running, additional interest is accruing on all tax and penalties owing.

My advice; file your return on time, even if you don’t have the money to pay the tax.  Contact the IRS to set up the installment agreement.  Don’t run from it.  It won’t help the situation.

As always, consult with your tax advisor!

Delayed Filing Season for Individual Tax Returns

The IRS has announced that it will not be ready to start processing tax returns impacted by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 until mid to late February.  The delay affects paper and electronic filers.  The IRS will announce when it will start processing tax returns impacted by the late tax law changes.

The delayed filing deadline applies to anyone who itemizes deductions on Schedule A, and to anyone who takes higher education tuition and fees deductions and educator expenses.  In the meantime, taxpayers should compile their information, start working on their tax returns or visit their tax preparers.  But… they should wait to file until the IRS announces it is ready to start processing returns!

Extensions: Are you in denial or are you a procrastinator?

You filed for an extension of your individual tax return in the spring but now it is time to face the task that you have been avoiding.  I am talking about getting those taxes done!  I know it is only July and the return is extended until October but the longer you wait the harder it will be to get started.

Here are some pointers to get you motivated whether you are preparing the return yourself or you are hiring a professional tax preparer.

1)      Start with your prior year tax return as a reference point.  Pull that 2008 tax return out of the filing cabinet and all the supporting documents.  Then pull out of the cabinet the file labeled “2009 taxes” and compare the 2009 to the 2008 documentation to compose an open item/missing list. 

2)       Don’t panic if you are missing several items!  It is easy to get a lot of the information on line.  Let’s say you are missing Form 1098 Home Mortgage Interest.  Most mortgage companies have that information available on line.

3)      Set a deadline to acquire all the missing information no later than August 15th.

4)      Now think about any changes that took place in your life during 2009.  Do you have a new dependent in your family?  Did you start a new job?  Did you acquire a new rental property? Did you move?  These new situations may have tax implications so you should gather all the pertinent information and do some research or bring this new information to your tax appointment.

No more excuses…You have gathered all the information so it is time to tackle the tax return yourself or visit your tax preparer.  Do not wait until October 12th to get started!!!  You will not be able to file a complete and accurate tax return at that point.  Also you will probably miss deductions and tax credits.  And last but not least, if you are hiring a professional tax preparer, remember that he can only do a good job if you give him all the information and enough time to evaluate your situation and process your tax return.

Finally, April 15th!

I have already had quite the morning.  My delicious protein smoothie spilled ALL OVER my car while driving in this morning.  REALLY?  That is how my day is going to start?  When are the car makers going to figure this out? MAKE DEEPER CUP HOLDERS!  I’m talking to Ford, GMC, Toyota – all car makers.  Do you not drive in your vehicles?  Do you not use the cup holders?  I know this isn’t in anyway related to accounting, but I thought I had to throw it out there.

So now that I’m starving, I’m eating an apple I packed in my lunch and counting on Paul bringing in Froggie’s doughnuts like he always does on April 15th.  The Polito family swears by these doughnuts.  Forget the diet for one day, I’m hungry.  The good thing is this day can only get better from here.  The partners are taking us out to a nice dinner tonight so at least I know it will end well.

Another tax season under the belt, the deadline has finally come.  It’s April 15th and I hope you have your tax returns or extensions filed.  Failure to file on time is a 5% penalty per month (maximum of 25%).  Keep in mind the extension is only for filing your tax return, NOT an extension to pay your tax (more penalties for not paying on time).  If you have a tax liability and do not pay the tax by TODAY, you will start racking up the interest and penalties.

What are we going to do?  Take some well deserved time off.  Our offices will be closed through Monday, April 19th.  We won’t be answering phone calls or replying to e-mails.  Don’t take it personally; we just need to catch up on sleep and family time.  We will be back to work on Tuesday April 20th.


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