Blog, Financial self-care

Tax Time Top 10 Tips

It’s TAX TIME!!

In case you forgot, taxes are due on April 15 every year. Except this year, when they’re due on April 18. Lucky YOU get one more weekend to:

  1. Decide if you can get everything together to file in time
  2. Or, file an extension.
  3. Or, push everything into a drawer and not deal with it*

*You know this is not the ideal choice, right?

A discussion of whether it’s ethically right to pay taxes or not is for another place — here, we deal in reality — and in the U.S. not filing and not paying taxes can create some really big problems in your reality. Especially if you’ve been paid by someone else who reported that payment to the IRS, especially x2 if it was in the form of a 1099 (which is an announcement to the IRS that you’ve gotten untaxed income). The IRS doesn’t play.

These are the top ten things I want you to know, with some details on how to move forward.You can do this!

ABOUT YOUR 2016 TAXES

  1. If you’re sure you don’t owe tax, there’s no penalty to file late but hey filing an extension is free and quick so do it anyway!
  2. Everyone qualifies for an automatic 6-month extension to file taxes — but don’t forget to file an extension with your state as well as the federal one.
  3. You have to pay the taxes you owe by the April 18 (usually April 15) deadline, even if you file an extension.
  4. If you owe tax and you can’t pay, you should file (or file an extension) since there’s a late filing fee as well as interest on late payments.
  5. If you can’t afford to pay all your taxes now, you just set up a payment plan. It’s no big deal — but you have to be proactive. Check out what the IRS says: “If you cannot pay what you owe, you can request an additional 60-120 days to pay your account in full through the Online Payment Agreement application or by calling 800-829-1040; no user fee will be charged. If you need more time to pay, you can request an installment agreement or you may qualify for an offer in compromise” (that last one is usually for a multiple year past taxes situation). If you owe less than $10,000 to the IRS, your installment plan will generally be automatically approved as a “guaranteed” installment agreement. But speaking of owing…

ABOUT PAST TAXES

  1. The IRS says this about refunds and filing back taxes: “If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date” because more than three years out the IRS will not return your money. RED ALERT: If you have not filed 2013 taxes, and expected to get a refund, you need to file 2013 taxes by April 15 (not 18) to get that refund. THIS IS NOT A TEST.
  2. So you’re past due on filing or paying taxes and the IRS has not sent you letters yet: This is the better of a sticky situation: get your past income and expenses documentation together as fast as possible and file the past taxes — check out this great post on What To Do To File Back Taxes — lots of pro-tips and step-by-step instructions. Set up a payment plan and get right with god.
  3. So you’re past due on filing or paying taxes and the IRS has sent you letters. Well, now the IRS is telling you what to do. Do like nike and Just Do It, with quickness where possible. Interest accrues monthly. Get that payment plan in place before they garnish you. And, if they’ve garnished you? Then try to pay extra to get it over with. It’s not going anywhere at this point. And yes, it really sucks!
  4. And it’s really tricky to discharge past tax bills in bankruptcy — you have to have filed them, for starts + about 100 other complex rules. It’s possible in some situations, but you’d want a lawyer.
  5. The IRS has a list of all the income (W-2s, 1099s and even 1098s) they have on the books for you, and you can see that list by requesting your past years transcripts at: https://www.irs.gov/individuals/get-transcript. You can also find past tax returns from the last 10 years if you are missing any with this form https://www.irs.gov/uac/about-form-4506

 

Say you’re interested in what amount might be owed for past tax:

    1. Fees for IRS installment plans — If you can pay off your balance within 120 days, it won’t cost you anything to set up an installment plan. Otherwise, you’ll owe $52 for setting up a direct debit agreement with the IRS, or $105 for a standard or payroll deduction agreement. If you’re a lower-income taxpayer, you may be able to reduce the fee to $43.
    2. The failure to file (FTF) late filing penalty is 5% of the additional taxes owed amount for every month (or fraction thereof) your return is late, up to a maximum of 25%. If you file more than 60 days after the due date, the minimum penalty is $135 or 100% of your unpaid tax, whichever is smaller. [source]
    3. Interest fees for late taxes are generally one–half of one percent (0.5%) of the actual tax owed for each month.