I can’t file my return on time

You’re allowed to get an automatic six-month extension if you file Form 4868 by April 15th, the due date of your return.  Instead of filing Form 4868, you can apply for an automatic extension by making an electronic payment by the due date.  Keep in mind that an extension request extends the time to file a return but not the time to pay your taxes.  If you do not pay your tax by the original due date, you will owe interest on the unpaid tax and may owe penalties.

I haven’t filed a return this year or in prior years

Not filing a return may seem like a way to buy time or prolong the punishment for not paying your tax bill.  The IRS may be backlogged, short on resources and may not discover you for years, but the IRS will eventually catch up and discover your failure to file and pay and assess accumulated interest and penalties.  Regardless of your reason for not filing a return, you should file all required tax returns as soon as possible.

If you haven’t filed by the extended due date of the return:

  • You may be subject to the failure to file penalty (unless you have reasonable cause).
  • Tax not paid in full by the original due date may be subject to the failure to pay penalty (unless you have reasonable cause).
  • Interest is charged on taxes and penalties not paid by the original due date.

The penalty for failure to file doesn’t apply to refunds.  However, you risk losing a refund if you fail to file within the statute of limitations (typically 3 years from due date).

You don’t have to figure the amount of any interest or penalties you may owe. Because figuring these amounts can be complicated, the IRS will do it for you.

If you’re missing some or all of your tax records, you can request transcripts of third party documents, such as Forms W-2 and 1099 and Schedule K-1 from the IRS.  Bank records may fill in the blanks as well.  If you’re self-employed and have no tax records, the IRS may use recommended industry standards.

I’m not able to pay my bill

When you file, pay as much as you can with your tax return to avoid penalties and interest.  As for the rest, the IRS feels your pain and is willing to work with you to devise alternate payment options.  The IRS website has a page for Paying Your Taxes with 3 options:

  • Installment payment plan: If you owe $50,000 or less, you can request a payment plan.  If you owe more than $50,000, you will need to complete a financial statement to determine the monthly payment.
  • Offer in Compromise (OIC): You may be able to make an offer to settle with the IRS for something less than is due. You’ll have to fill out Form 656 and show that you are unable to pay, for example, the amount owed is higher than your total assets and income.
  • Hardship cases: If you will become destitute in order to pay the taxes, you can fill out Form 911, Request for Taxpayer Advocate Service Assistance, to ask the IRS to delay tax collection.  This isn’t your best option, since you’ll still be racking up penalties and interest and the IRS can file a lien against you.

If none of these options appeal to you, there are other places you can turn to for funds to pay your taxes, but make sure you inquire about any potential tax consequences.  Home equity loans, 401(k) loans and borrowing on cash value of life insurance are possibilities to look into.  Credit cards can be used, though you will be charged a processing fee.

If you can’t file or pay your taxes on time, don’t bury your head in the sand.  Hiding from the IRS is not a successful strategy and will cost you money in the long run.  Failure to properly work with the IRS may result in stiff penalties, enforced collection action against you, and in extreme cases, criminal penalties and possible jail time.

You can file your return on your own if you feel comfortable doing so, otherwise seek out the advice and help of a tax professional.  The IRS offers free options to prepare and file your return on the IRS website or in your local community if you qualify.  The IRS website also provides answers to your tax questions.

If you don’t want to contact the IRS directly, learn how Clergy Financial Resources can help.   

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: cfr@clergyfinancial.com