Bottom Line
Tax Tips
Late filing and payment options

By Howard Abrams, PBS Tax & Bookkeeping

Q. I cannot file my taxes by April 17. What should I do?

A. You should 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 Oct. 17, 2012. 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 2011 return, you should get it paid by April 17, 2012, so you can eliminate the late payment penalty.

A general rule in most cases is to have paid in 100 percent of the total tax from your 2011 tax return. You will have to estimate the amount of tax due. The IRS can invalidate an extension if tax is understated. An extension is valid even though the estimated balance due is not paid.

If you’re in a refund situation and you file an extension, there will not be any underpayment penalties. If you owe taxes and pay the balance when you file your tax return after April 17 even though you have a valid extension, you can bet the IRS will hit you with late payment penalties.

Abatement of penalties and interest

Late payment penalties can be reduced or waived only if you can show reasonable cause.

Reasonable cause for late filing includes:

  • Death or serious illness of the taxpayer or immediate family member.
  • Unavoidable absence of the taxpayer on the filing date.
  • Destruction of the taxpayer’s residence or business.

Submit a written request to the director of your IRS center. You must include a signed declaration saying “Under penalties of perjury, I declare that I have examined this statement and accompanying information and, to the best of my knowledge and belief, they are true, correct and complete.”

Q. My tax return is finished, but I don’t have the money to pay for it. What can I do?

A.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.

And lastly, you can request an installment agreement. If you file your income tax return on time and owe not more than $10,000, you can get a guaranteed installment agreement by filing Form 9465, “Installment Agreement Request,” with your tax return. 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.

Q. What should I do if there was a mistake on the tax return I filed?

A. Anyone who has found a mistake on a previously filed tax return or has omitted deductions or income on the return can correct the error by filing an amended return. The return is corrected by filing Form 1040X, Amended U.S. Individual Income Tax Return. But errors in mathematics or leaving a schedule out such as Form W-2 usually will not require the filing of a 1040X. The IRS will request the W-2 and will fix the mathematical error.

There are three instances where we do recommend filing an amended tax return. Do so if a mistake was made in the following areas: (1) filing status, (2) errors in reporting income, or (3) errors in deductions or credits. LL


This article is written 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. If you would like further information, please contact PBS at 800-697-5153 or visit their website at pbstax.com.

Please remember 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.