You may have just lost your job, your house and your credit limits, but you still should file your tax return by the April 15 deadline, or at least get an extension. Failure-to-file penalties are way worse than failure-to-pay fines, and you have several options for dealing with a tax bill, including setting up a payment plan.
Some key points to remember:
- If you cannot meet the April 15 deadline, you can ask for an EXTENSION OF TIME TO FILE. But getting an extension doesn’t mean you get a break from paying. You still must send in an estimated payment.
- The failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is the smaller of $135 or 100% of the unpaid tax.
- It’s best to file and pay what you can. Interest and failure-to-pay penalties will just increase the amount you owe. In some cases, the penalty and interest charges could increase your tax bill by 25% or more.
- You can work out an installment pay plan with the IRS. (CLICK HERE FOR DETAILS) However, you can save money by paying the full amount as fast as possible to minimize the interest and penalties you’ll be charged. It also costs you to set up these plans:Â The user fee for new installment plans is $105 and $52 for plans where payments are deducted directly from your bank account.Â (Some low-income taxpayers can pay a reduced user fee of $43 for setting up the plan.)
- Lost your job? Severance pay and unemployment benefits are taxable. (Hopefully you had tax withheld or made estimated tax payments to avoid a big tax bill.) Food stamps are not taxable. For more info on job-related tax issues look for PUBLICATION 4128, TAX IMPACT OF JOB LOSS.
More info: check out my answers to other tax questions:
Also online: You can always visit the IRS site for forms and tips at www.irs.gov