IRS Audit Help, IRS Tax Problems, Tax Audit Help

Just In Time Management

April 17, 2013 - IRS Audit Help, IRS Tax Problems, Tax Audit Help

It doesn’t matter what business you are in. It doesn’t matter if you are in a business at all. We all must practice some kind of time management.   I confess. I am a deadline driven woman. And I do practice time management. Sometimes it is “just in time” management. Other people don’t realize they, too, practice “in the nick of time” management. Advance planning is the key to successful time management.   As carefully as I plan my tax season, as carefully as I plan my work days, there is always something that pops its head up, like that “whack-a-mole” game in the arcade. Something needs immediate attention. Do you have that in your life?   We have just ended another “1040 Marathon.” Just because April 15th is past doesn’t mean it is the end of tax season.   My father was proud of me when I told him I was going to leave the Internal Revenue Service and begin my own income tax practice. And then he laughed (not just to himself) when I told him it would be a great seasonal business and I could do other things the rest of the year. He had life experience and he knew better. And I have learned that tax season never really ends.   Yes, I filed an extension for myself and for several clients. I encourage clients to bring me their information so I can file their extension before 4/15 and then we sit down together and file their tax return later. As I’ve said in earlier blogs, the extension does not give you any more time to pay your taxes. It gives you additional time to file the information. Years ago I would have said, “file the paperwork”. Now that we file electronically, or e-file, we keep the paperwork and we file the information.   What happens if you filed that extension and when you finish your return you see that you owe tax? The IRS will assess interest and they will assess penalties. Interest cannot be waived.   The law requires they charge you interest on unpaid or late-paid taxes. The IRS will charge you interest from the date the taxes should have been paid until the date they actually were paid. PLUS they will charge you a late-filing penalty. IRS may also assess a late-payment penalty. This sounds terrible. Is there no end to these “additions to tax”? Actually, there is.   The late-filing penalty is 5% per month (or part of a month) with a  maximum penalty for late-filing of 25%. On just $100 that 25% is $25.00. On $1000, a 5% penalty is $50 and a 25% penalty is $250. How much will you owe?   My advice to you is to file that return as quickly as possible to minimize the penalty. IRS may send you a bill, and you may need to make payments, but you will be stopping that penalty.   In a future blog I’ll be sharing with you how to manage your tax payments. This will be good information for those of you who are self-employed. And I will have a secret tip for those of you who are employees.   Always to your lowest legal tax,   Nellie T Williams, EA