March 28, 2024

It’s Tax Time Again for the Millions Who Got an Extension

If someone owes taxes but doesn’t have the money to pay the full balance, it’s still best to file a return, Mr. Christensen said. People are often reluctant to call the I.R.S., but it’s better to initiate communication with the agency and discuss your circumstances, he said. Contact the I.R.S., explain your situation and seek an agreement to pay the bill over time, he said. That way, you’ll avoid late-filing penalties.

“You’re better off filing,” he said, “ even if you can’t pay.”

The penalty for filing late is 5 percent of the tax that is owed, for each month (or partial month) the payment is late. The failure-to-pay penalty is 0.5 percent of the amount unpaid, also charged monthly. (Penalties are capped at 25 percent of the tax owed.)

The I.R.S. is often willing to waive the penalties for those filing or paying late for the first time, said Shannon Hudson, a certified public accountant and partner at Altair Group in Bedford, N.H. An abatement is not guaranteed, she said, but If you have a good track record, “more often than not, they’ll abate it.”

The good news is that if you’re due a refund, you won’t owe any penalties. But if you are owed money, it’s best to file a return and collect it, Ms. Hudson said, because there is a window of three years for collecting a refund. So anyone who is due money should file as soon as possible. The average refund is more than $2,700, the I.R.S. said.

If your refund is much larger (or smaller) than expected, it may be a good idea to check how much is withheld from your paycheck each pay period. You can increase or decrease your withholding by filing a new Form W-4 with your employer. The I.R.S. W-4 online withholding estimator can help you fill out the form.

Article source: https://www.nytimes.com/2019/10/11/your-money/tax-filing-extension.html?emc=rss&partner=rss

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