Last Minute Tax Tips for Late Filers

As tax season draws to a close, millions of Americans will scramble to get their documents together and file their income tax returns before the April 15 deadline. Tax procrastination is a national pastime, so don't feel as though you're the only filer going through this rushed and stressful process. Here are a few last-minute tax filing tips to help you get through the process unscathed.

E-file Your Taxes

E-filing reduces the chances making of math errors on your return because the software does most of the math for you. It also reduces IRS errors because the data is entered directly into the agency's computer system instead of being copied from a form.

The number of taxpayers who take advantage of electronic filing (e-filing) increases every year, due to ease of use and faster tax refunds. Tax refunds are often issued about two weeks after a taxpayer files an electronic return. 

This year, more than 90% of Americans filed their taxes online using commercial software, a tax professional, or the IRS's free filing options.

The IRS recently started a free direct file pilot program that allows taxpayers to enter their information into the agency's computer system without needing to use third-party software.

If you prefer to use the tax preparation software available through commercial providers, most have partnered with the IRS's free file program and will let most taxpayers with incomes of $79,000 or less use their tax prep software for free.

Get an Automatic Extension

Sometimes things like family emergencies or missing documents keep you from getting your returns done by the filing deadline. The good news is that the IRS offers an automatic six-month extension. This usually gives you until about Oct. 15 to file your returns.

While an extension of the time you have to file will allow you to avoid late-filing penalties, it is not an extension of time to pay your taxes. If you owe taxes, that money is still due on April 15. Failure to pay subjects you to penalties and interest until your bill is paid. While it's difficult to know exactly what you owe until your return is complete, the IRS recommends making a payment based on an estimate.

If the income from your job is subject to employer withholding and you often receive a refund, there's a good chance you won't have any tax due when you request a tax extension.

If You Can't Afford To Pay

If you're waiting until the last minute because you can't pay what you owe by the tax filing deadline, there are other options. You may be able to contact the IRS and get a short-term payment plan that gives you an additional 180 days to pay. 

The IRS won't charge for this extension, but you will still be liable for late-payment penalties and interest until your tax bill is paid. You may also qualify for long-term and short-term payment plans.

If you can't pay your full tax bill, long-term payment plans are available. There are fees involved in setting up the long-term installment agreements and you will still be charged penalties and interest, even if you are making the required payments. 

Since the penalties and interest can end up being more than 25% of your unpaid tax bill, it's often recommended to sell property or assets to pay it off.

Partial Payments

If you pay a majority portion of your payment, it can help in two ways. First, it reduces the amount of penalties you will be assessed for interest and late payment of taxes. Second, it is a good-faith showing to the IRS that you are serious about paying your taxes and are not trying to avoid liability.

Credit Card Payments

Making a credit card payment may be tempting but you need to check your credit card interest rates. Paying your taxes by credit card may also add processing fees that could make it more expensive. 

If you just need to use the credit for a few months and can pay off your credit card in full before too long, credit cards can make sense.

Dealing With Late Payment Penalties

If you fail to file your taxes, you may be assessed a failure-to-file penalty. If you don't pay your taxes by the due date, you'll be assessed interest and could face a failure-to-pay penalty. The failure-to-file penalty is generally 5% of unpaid taxes per month, up to 25%. The failure-to-pay penalty is generally 0.5% for each month of the tax. 

This is all in addition to interest on the unpaid taxes.

Do I Need to File?

Some taxpayers earn so little money that they don't need to file a federal income tax return, while others have more than enough withheld from their paychecks to cover their tax bills. Do these people need to file, since they won't get into trouble with the IRS if they don't?

While they will not face any IRS penalties or collection actions, there are two reasons people who owe no income tax should still file a return. First, many employers withhold too much from their employees' checks. Filing a return will get that overpayment refunded. Second, certain federal tax benefits are only available if you file a return, such as the child tax credit and the earned income credit.

Still Have Questions? A Tax Lawyer Can Help

If you can't get your tax returns filed on time, are having problems with an IRS tax issue, or need help working out a payment agreement with the IRS, a local tax lawyer can help. A tax attorney understands the IRS filing and payment process. They can guide you through to process to ensure that you don't pay any more penalties and interest than is necessary.