Filing and Paying Your Income Taxes

Added on 1/11/05

 

FILING DEADLINES

Our income taxes are due on April 15th of each year.  The deadline is met if the envelope is postmarked by that date.  The penalty for not filing a timely tax return is 5% per month, or fraction of a month, of the amount of tax due with the return up to a maximum of 25%.  In addition interest is charged from April 15th until the payment date at the prevailing interest rate.  This rate changes each quarter.  Currently it is 5% per year-compounded daily.  In addition there is also a late paying penalty of 0.5%/month or fraction of a month on any unpaid balance that is paid after April 15th.  This penalty will not be charged if the 5% penalty has been charged.

Persons that are outside of the USA (working or traveling) may file & pay their tax return by June 15th.  If you will be traveling outside the USA on April 15th, please check with our office as to the requirements you must meet to file by June 15th.

Military personnel that are stationed in a designated war zones have special rules that apply.  Please call our office if you or a member of your family is stationed in a war zone.

PA rules are very similar to the above.

 

EXTENSIONS:

If you cannot have your information ready by April 15th  (June 15th if you are outside the USA on April 15th) you can get an automatic extension of the filing date to August 15th.  This extension is only for filing the tax return, not paying the tax.  If you have had enough federal taxes withheld from your pay or paid enough in estimated payments to cover your income tax liability, you will automatically be granted an extension.  If you think that you need to pay more money, a form 4868 needs to be filed with a payment by April 15th.  If you feel you will owe more money but do not have the cash on hand, then file a form 4868 by April 15th with no money.  No late filing penalty will be charged if the tax return is filed by the extended due date.  The late payment penalty still applies if the total tax due is more than 10% of your tax liability.

For those among us that really hate to file tax returns, there is a second 2-month extension, making the tax return due on October 15th. This extension is not automatic and is applied for by August 15th using form 2688.  The IRS will send back a signed approval or disapproval.  If the IRS does not approve the second extension you will have 15 days from the date of the rejection letter to file your return.

One of the disadvantages of filing after April 15th, even with an extension, is that the tax return may be audited within 3 years of the date it was filed.  A 2004 tax return that is filed on or before April 15, 2005 generally may not be audited after April 15, 2008.  If a 2004 tax return is filed on August 15, 2005, then it may audited at anytime up to August 15, 2008.

When it comes to income taxes, procrastination can be very expensive.

FILING & PAYING:

There are three ways to file a return:

  1. Paper return mailed to correct IRS Center

  2. Electronic Filing

  3. Telefile (only available to certain taxpayers)

Regardless of which method you use, if you have a refund, you may choose to receive a check or have the refund direct deposited into your checking or savings account.  Generally a paper return with a refund check takes 4 to 8 weeks to process the check.  Direct deposit will shorten the time by about 8 days.  Electronic or Telefile returns with a refund check take about 3 weeks to process the check.  Direct deposit will shorten the time to 14 days or less.

If you owe additional tax there are three methods available:

  1. Attach a check to your return.

  2. Have funds electronically withdrawn from your checking or savings account.  If you use this method, you may choose the day on which the funds are to be withdrawn.  Usually that is the due date of the return, April 15th.

  3. Payment by credit card.  There is a fee to pay by credit card.  Discuss this with your tax preparer if you think you would like to use this method.

If you make estimated payments, instead of mailing those payments, you have the option of having the funds withdrawn from your checking account.  To use this option you must register with EFTPS and file your estimated payments on the Internet.  For more information or to register for EFTPS, go to www.EFTPS.gov.