Hello, fellow taxpayers,
Tax season 2018 is finally over!! (with the deadline for the extended returns being this past Monday, October 15th.)
I have about 10-15 current year returns to be finished (not including late prior years), but I am still waiting for lots of missing (and requested) information. If you are a procrastinator and are expecting a refund on the late return, penalties or interest for late filing or paying will not be assessed. However, if you are one of the unlucky taxpayers that owe money (and most late filers do owe with their return, then you will be assessed a late filing penalty of 5% per month or part thereof. Late paying is only one-half percent per month or part. This is why I stress that you file on time even if you cannot pay. We can always work out a deal with the IRS.
What happens if you are expecting a refund and you do not file. The IRS has the legal authority to prepare a return on your behalf. Even if you have children, can itemize, have education credits and are married (so you can file jointly), you cannot get any of these. You will get your own exemption, the standard the deduction, no credits and you will file married filing separately; generally the worse tax filing you could be in. Now, you go from a tax refund to a tax due. If that tax due is over $10,000, the IRS can place a lien on your social security number, which means you cannot sell your home or car.
One of these arrangements is an offer in compromise. This is where you pay less than what you owe. However, the issue is that you have to meet strict IRS guidelines which usually have nothing to do with reality.
I have one client whom the IRS wants $2200+/month to full pay a rather sizable debt. Using actual numbers, they can afford to pay less than $100. The IRS will not budge.
I have a new client who was paying $500/month and that they could not afford to pay. We negotiated and proved, even using IRS guidelines that the payment should be $250/month. They accepted it.
The first was on a rejected offer where only 42% are accepted. The latter was a partial payment installment agreement. In both scenarios, we have to prove income and sometimes assets. Negotiating is a time consuming and drawn out process, but the outcome can get you back on track (hence the term of this program, “The Fresh Start Initiative”).
So to all my dear readers, if you or anyone you know, is not filing for fear of owing, remind them that is not the way to go. Have them come to see me, Don’t be a procrastinator! It is better to file late than never!