Do You Think You’re Going to Owe the IRS this year?

Funny how so many people come in as soon as possible to get their taxes done when they think they’re going to get a refund. Tax preparers are inundated in late January and early February, then have a big gap until the middle of March when their clients start coming in who aren’t sure. Then…..if they’re going to owe money, they want to file an extension to postpone the time when they “have to pay.” Worse -- a lot of people come see us for the first time in October when there's little time left to deal with a large tax bill.

If you think you’re going to owe the IRS or State this year, I have a new plan for you. Go ahead and have your tax return prepared as early in the year as possible (Click Here to make an appointment), find out how much you’re going to owe, and work with your preparer to strategize on when to file or how to get a payment agreement for the amounts owed. This way, at the very least, you save on the following penalties:

• 5% per month for five months on the tax owed if you fail to file on time. By filing an extension, you extend the time to file until October 15^th without this penalty. If you file on October 16^th, though, wham!!!! You'll get hit with a 25% penalty going back to April 16th, plus

• 0.5% late payment penalty on the unpaid tax for each month or partial month you don't pay.

Interest is charged on top of the tax and penalties and varies depending on the prevailing interest rates, which are currently 3% per annum.

The Moral of the Story???

Always, always, always file your tax return on time, even if you can't pay the amount owed. For purposes of this moral, filing an extension extends the filing date for six months, so your individual tax return is considered on time if you file by October 15^th with an extension.

How expensive is filing late???

Let’s say you owe $5,000 when you file late on October 16^th. Here’s about what you would owe:

Late filing penalty for first five months: $ 1,250.00

Late payment penalty for first five months: $ 125.00

Interest from April 16^th to October 16^th : $ 95.63 (Approximately)

Total owed: $ 6,470.63

If you had filed on time even without paying the tax owed, your bill would be $1,250 less along with an adjustment on the interest.

Total owed: $ 5,201.88

So…..come on in; Click Here and make your appointment today, get your return prepared early, and if you owe and can’t pay, have us give you the best advice on what to do in your particular circumstances.