Government Shutdown, IRS Problems, Tax Audit
The Doors to Government May Be Closed, but the IRS Mailroom is Still Open
October 11, 2013 - Government Shutdown, IRS Problems, Tax Audit
During these uncertain days of our government shut-down, one thing is for sure. Some of the employees at the Internal Revenue Service are considered essential. While some may be on furlough with or without pay, others are expected to put in their regular time.
The Customer Service section may be reduced for now. But I’m sure the collections division is open. And I know the IRS will be accepting tax returns. Our government depends on our tax dollars to pay its bills.
Whether you file by mail or whether you file electronically, if your return is on extension and you have not filed it yet, you have until October 15th to meet your extended due date. Rain or shine, open or not, if you file after October 15th you are now a tax delinquent.
There is no “time out” or “detention” or “stay after class” at the Internal Revenue Service. There is no “dunce cap”. But if you owe tax, there is something else to watch out for.
I tell my clients who file a tax return with a balance due, they can either have the IRS debit the money right from their bank account, or they can mail in their check or money order. If they can’t pay their tax bill in full, I tell them to send in as much as they can. And then I add, “And expect a bill for interest and penalties”. These are what the IRS calls “additions to tax.”
WHAT?! Why?! If you don’t pay your tax in full before or by April 15th, then you are inviting additions to your tax.
The IRS must, MUST, by law assess interest on late paid taxes. They cannot fail to bill you for, or waive, any of the interest.
When you owe tax after April 15th, you can be subject to all kinds of penalties. There is a failure to file penalty. There is a failure to pay penalty. There can be a failure to pay estimated taxes penalty. PLUS your state may also assess penalties and interest if you also have a balance due with that extended return.
Sometimes life just happens. You may have an unusual situation and a really good reason for not having been able to estimate on April 15th your taxes due for the year. It never hurts to ask nicely if the IRS would be able to abate (or eliminate) any part of the penalties. Write a letter of explanation. Don’t lie. Don’t exaggerate. Do be complete in your explanation. Be polite in your request. Ask your tax advisor for help. Or consult with me.
If you miss the October 15th extended date to file, that return is just flat out delinquent. To get off the IRS’ “naughty” list, file a correct return as soon as possible. Expect to pay interest. Expect to pay penalties. Plan to pay your full tax before April 15th next year to avoid those additions to tax and stay completely off their mailing list.