We are done with taxes for another year. I’m sure that’s what many individuals reading this article think. And for many of you, you would be right; those of you who are business owners know that taxes are a regular part of the day to day operations. There are sales taxes for many businesses that sell products and quarterly taxes – or more frequently – for businesses that employ people. These will include withholdings from employee checks as well as the employer obligation. Quarterly returns will likely be discussed in more detail in a later column.
For individuals (and businesses, if you are one), the question is: “Did you complete your tax return by the due date this year?” All early indications are that more taxpayers than usual will have waited to file their returns this year. Everyone from the single person shop to national chains have reported a slower than normal tax return filing season. Perhaps it is the belief that something, anything, might happen on the national stage given our current political environment. It could be that you didn’t get your forms in a timely manner, or that you received corrected forms. The state of Arizona, for example, sent out incorrect refund statements – the 1099-G – and had to send corrected forms. If your answer was “no” to filing by April 18, you have until Sept. 15 to file if you have extended your partnership or S Corporation, and Oct. 15 for Individuals and C Corporations. The IRS recently simplified the automatic extension process; it used to take two extension applications to make Oct. 15 your deadline, but now it is one.
Individuals who did not file an extension and do not owe get some relief of sorts. You can just gather your tax information and get to filing. If you didn’t file an extension but you may owe, you will pay a failure to file penalty and a little interest on that balance. The failure to file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to a maximum of 25 percent. The interest rate is determined quarterly and is the federal short-term rate plus three percent. Corporations face much steeper failure to file penalties. While this is quite the mouthful, suffice it to say, if you think you owe, get in and get it done. The sooner you do, the lower the penalties. What if you cannot pay when you file your return? The United States Department of the Treasury (the “bank” of the IRS) will work out a payment plan with you if you need one. You can set up an Installment Agreement to pay off your balance, but it will cost you. The user fee for a regular Installment Agreement has increased from $120 to $225, the fee for Direct Debit increased from $52 to $107. If you fall behind and need to reinstate your Installment Agreement, that fee is $89, up from $50. It is much better to pay balances due in full if you can afford it. Taxpayers who are making payments on a prior year balance due will have any future refunds applied to the older year until you are paid in full. IRS will allow you to set up the terms over 72 payments; however, you can pay them off early with no penalties and you can save yourself a little interest!
How can you avoid owing in the first place? Tune in next month for tips on that front.
Filing season doesn’t necessarily end for Enrolled Agents or CPAs at the April 15 (April 18) deadline, and if you haven’t filed yet, you’re not alone, and it’s not too late. Many people wait on filing taxes for a variety of reasons, and whatever the reason, just gather what you have and call your tax professional.
Remember, you may lose your right to claim a refund if you file more than three years late. That silent “poof” that you didn’t even know you heard was an estimated $950 million that taxpayers lost the right to from 2012. The IRS has implemented Modernized E-File, or MEF, which means that refund you forgot to claim from 2014, 2015 or 2016 can be electronically filed if your preparer offers it. No paper tax return, no certified mail, no post office visits. In case you were wondering, we do. Give us a call for your appointment today. Reduce or stop your accruing penalties or get that refund on its way to you. FBN
By Patrick Fleming, EA
Patrick Fleming, EA is a partner with Northern AZ Financial Services Co., northerazfinancial.com He can be reached at 928-526-3999.
