Bottom Line
Tax Tips
Income tax time: part 2

Barry & Howard
pbs tax & bookkeeping service

Haven’t filed a tax return in years?
Not filing your income tax return can get you into serious trouble. If you don’t file for one year, the odds are you will be afraid to file for the next year. And suddenly you haven’t filed for three, four or five years because you are afraid to contact the IRS.

Since the IRS is more interested in getting the delinquent taxpayers back in the habit of filing the returns and making up for the past filings, non-filers do not have to worry about going to jail. As long as you cooperate and file your tax returns, the IRS is not going to lock you up.

It is best to file the omitted returns before the IRS contacts you. The fact that you are not able to pay the back taxes should not prevent you from filing those returns. Once the return has been filed, you may discuss with the IRS your payment options. You may find them surprisingly lenient. You should also try to get the penalties waived if you have a reasonable excuse. Sometimes the penalties can be waived anyway. The interest, however, cannot be waived except in rare cases.

If the IRS comes after you before you have taken the steps to file the delinquent returns, it is still not too late to work out a solution. The IRS will accept a timetable for filing the back returns.

Can’t pay your taxes?
File the return on time or file for an extension to avoid a late filing penalty of 5 percent per month up to 25 percent. If you think you can make the payment within a few months of filing, pay as much as possible with the return or extension. Mail the balance when you receive the IRS notice of tax due.

Paying by credit card is another option, however, a percentage of the tax due is charged as a convenience fee plus interest at the credit card rate. This can be costly.

Lastly, you can request an installment agreement. If you file your income tax return on time and owe not more that $10,000, you can get a guaranteed installment agreement by filing Form 9465 – Installment Agreement Request – with your tax return in order to set up a payment plan. The tax must be paid in three years. The IRS will usually accept installment agreements on Form 9465 from taxpayers if the unpaid liability is $25,000 or less and the tax will be paid within five years. There is, however, no guarantee of acceptance of an installment agreement with tax liabilities above $10,000. Any taxpayer who has an installment agreement for a prior year cannot file Form 9465. In that case, they will have to negotiate with the IRS.

Can’t file on time? — Get an extension
If your tax return is not going to be done by April 15, you may choose to file an “Application for Automatic Extension of Time” – Form 4868. An extension means that you are extending the filing of your income tax return until Aug. 16, 2004. By filing the extension application, you will eliminate a late filing penalty. However, it is not an extension of time to pay any taxes due. Therefore, if you think you are going to owe money on your 2003 return, it is a good idea to get it paid by April 15, 2004, so you can eliminate a late-payment penalty. You will have to estimate the amount of tax due. If you’re in a refund situation and you file an extension, there will not be any underpayment penalties.

Estimated income taxes
April 15 is not only the due date for filing your 2003 tax return, but also the due date of your first estimated tax payment for 2004 taxes. Many truckers who do not pay their estimated income taxes on a quarterly basis and prefer to wait until the end of the year are often surprised to find out they have been charged penalties by the IRS. The point here is the IRS wants to get their money on a timely basis throughout the year and so they have set up a method of paying estimated taxes four times a year.

More Tax Tips

Proof of mailing
It is always advisable to send tax returns certified mail, return receipt requested, or get a receipt from an IRS-approved express delivery service. According to the IRS, this is the only proof you can count on to prove you mailed the tax return on time.

IRA contributions
April 15 is the last day to make an IRA contribution for the 2003 tax year. Extensions do not change this fact. This applies to regular and Roth IRAs. Remember, regular IRAs are tax deductible and Roth IRAs are not. You can make contributions to Simplified Employee Pension (SEP) IRAs by the return due date, including extensions.

Socal Security numbers
The IRS will disallow personal exemptions and other tax benefits (such as the earned income credit) claimed for any person whose name does not match his/her Social Security number on a tax return. Women who changed their names when they married face the loss of their exemptions if they don’t update information with the Social Security Administration. Update Social Security information by filing Form SS-5. Forms can be obtained by mail or from your local Social Security office. Always double check the Social Security number on your tax return before filing.

This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter century. Contributions to this article were made by Shasta May, director of business development for PBS. If you would like further information, please contact us at 1-800-697-5153. Visit our Web site at

Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.