The Procrastinator’s Guide to Last Minute Tax Returns

Maybe you’re busy; maybe you’re just lazy. If you still haven’t filed your tax return, we are not here to judge . We’re here to help. Let’s start with the good news: you have three extra days to apply. The 15th is a day off in Washington, so this year’s deadline is Monday, April 18th. Here’s a step-by-step guide to put everything together in time.

What happens if you don’t pay taxes

Be careful procrastinators: being late can mean spending a lot of money. If you owe the IRS money, there is a late penalty and a late payment penalty. TurboTax summarizes them :

The penalty for late filing of tax returns is used, if you owe taxes and have not filed a return or an extension until 18 April 2016.

• This penalty also applies if you owe taxes, applied for an extension, but did not file your tax return before October 17, 2016.
• Tip: The late submission penalty can be 10 times higher than the late payment penalty. If you can’t pay your tax bill and haven’t applied for an extension, at least file your tax return as soon as possible! You can always fix this later.

A late payment penalty applies if you have not paid any additional taxes due by April 18, 2016, regardless of whether you applied for an extension or not.

• The penalty for late payment is 0.5% (1/2 of 1 percent) of the amount of additional tax for each month (or part of it) of unpaid due tax, but not more than 25%.
• For any month (s) in which late payment and late filing penalties apply, there is no 0.5% late payment penalty.

The IRS offers a full list of all late filing penalties, but the bottom line is that if you owe them money this year and don’t pay them by April 18, they will charge you.

On the other hand, if they owe you money back, the IRS really doesn’t care when you apply. In fact, you have three years to apply and you will still receive your money. You then forfeit your reimbursement and it becomes the property of the US Treasury. In fact, the IRS recently announced that they have $ 1 billion in unclaimed refunds , so if you haven’t applied in the past three years, you might want to get one. However, the bottom line is this: there are no late fees if the IRS owes you money. (The only punishment is to know that you have overpaid taxes, but that is on you.)

Step 1. Decide whether to apply for an extension

Yes, the IRS will give you more time to file, but there is a major caveat: you still have to pay taxes on tax day, even if you are given an extension. If you don’t, you will be hooked on a late payment penalty. Generally, renewals are a good idea only if you have a lot of paperwork to complete and little time to pay taxes properly. You will get another six months to file your claim with no penalties.

You can apply for the extension online using the IRS Form 4868 in the Free File, or download it from the IRS website . You must submit your request before the due date for taxes, and once you have done so, the form will guide you through the process of paying any taxes you owe. (You can estimate how much you owe using the IRS Income Statement . This calculator will also give you a rough estimate.)

Don’t try to transfer another one to the IRS. If you owe $ 7,000 and you “estimate” your debt at one hundred dollars, the IRS may decline your renewal and charge you a late fee. For this reason, it is probably best to err on the side of overpayment. Of course, if you underestimate, you will also have to pay the full amount when you actually apply. The IRS claims that you must pay at least 90% of your taxes by the due date.

Again, if you are expecting to receive a refund, you have nothing to worry about. If you get your money back, the IRS doesn’t care when you apply, so you don’t need an extension. You must be 100% sure you will receive your refund or you will end up with a huge tax bill.

Most states accept your federal extension, which means you do not need to file a separate extension for state taxes. However, look here for specific rules for your state , as they may differ.

Step 2. Determine How You Will Pay

If you have tax cash on the 18th, you will provide it when you file your tax return (or your renewal) on the 18th. If you don’t have the money to pay, you have several options .

• Payment renewal : Using IRS Form 1127, you can apply for a payment renewal for up to 12 months if you qualify due to financial difficulties. You will still have to pay interest, but the late payment penalty will be waived. The IRS details all the rules here .
• Time Delay Collection : With this option, the IRS agrees to postpone your bill if you have financial difficulties. You can apply using the Application for gathering information (Form 433-F, Form 433-A or Form 433-B). You will need to provide proof of your financial condition and you will still have to pay interest and late fees.
• Compromise Offer: In some rare cases, the IRS will pay you less. This is called a Compromise Offer . However, even filing an application comes with a hefty processing fee ($ 186) and you also have to fork out a bunch of paperwork, which can be overwhelming if you’re already short on time. The IRS has a prequalification tool , so it might be worth seeing if this option is possible.
• Short Term Payment Plan: Here you can set up your IRS payment plan. With a short-term payment plan, you have 120 days to pay. They won’t charge you for it, but you will pay interest and late fees. However, as you use a payment plan, the penalties and interest you owe decrease.
• Monthly Payment Plan or Installment: If you need more than 120 days, you can enter into a repayment agreement with the IRS that includes a processing fee. If you pay monthly, they charge $ 52 for debiting your account ($ 43 for low income taxpayers). If you have a standard contract or payroll retention plan, you are charged $ 105. You will still have to pay interest and penalties.

The IRS details the payment options here . With some options, the application process is immediate if you apply online, but you want to check the details to be sure. If your application is rejected and the tax deadline has passed, your penalties and interest will begin to accumulate.

The IRS also offers some benefits for members of the military and residents in areas affected by the 2015 disaster .

Step 3. Decide whether to look for a professional or do it yourself

If you have a standard full-time job and make less than $ 62,000 a year, your taxes should be pretty simple. You can use the IRS Free File option and submit your declaration online. Of course, you can also file a paper return. The IRS tells you where to file and what form you need .

You may be self-employed and need help with your retentions. Or maybe you are a freelancer and have a whole lot of 1099 to go through. Or maybe you have multiple investment accounts and more paperwork than you know what to deal with. If you’re unsure of where to start with taxes, it’s probably worth paying a professional to help you figure it out, especially now that you’re running out of time.

If you are going to entrust taxes to a professional, choose carefully because you will end up on the hook for any mistakes. The IRS has a new directory of tax inspectors to help you find it.

Of course, there is a proven option for filing documents using tax software . Again, depending on your tax filing requirements, you can pay up to a hundred dollars to file a tax return, despite the “absolutely zero” cost. The consumer explains:

You may have seen advertisements for “absolute zero” TurboTax rates, but most taxpayers are not eligible to participate in this program. Only people who usually fill out a 1040A or 1040EZ will pay $ 0, and these are workers who have wages and do not own a business, have a mortgage, or have any kind of dependents.

They also tend to raise prices as you get closer to your deadline . To give you an idea of ​​what pricing looks like, I am a self-employed freelancer who usually defers filing his tax return. I pay around $ 150 to sign up for TurboTax every year. Next year, it might be worth turning over all my documents to a professional.

Step 4. Organize your tax documents

If you decide to do this yourself, set aside a few hours to do it. Then get ready to go through with it. Here’s how to simplify the process.

Collect your papers and forms

You will need W-2 papers, 1099 papers, receipts, and so on. When you have everything you need, arrange the documents in three stacks :

• Income : Your 1099 and W2 will go here. These include reported income for the year, whether it be your job, interest on a savings account, dividends, etc.
• Expenses and Withholdings : The Pied Fool explains, “This is where you store mortgage statements, investment expenses, medical bills, childcare expenses, and receipts for non-reimbursable / employment-related gases, food, and housing.” In short, keep receipts and records of any withholdings you will be making at the time of your tax payment.
• Investments : This is where you will keep track of all your investment reports, dividend notices, purchase receipts, and any other investment-related documents you may need in April. You can further subdivide this folder into taxable, tax-deductible / tax-deferred, and non-deductible investments.

Once you get things organized, the process becomes much easier because you can focus on each pile for each section of your taxes.

Step 5. Review your taxes and submit your tax return

Accounting for taxes seems tricky, but it basically comes down to reporting your income and using your benefits. It is relatively easy to report your income, but you need to be sure you are getting all deductions, benefits, and loans. Your tax software or compiler should help you with this process. If you’re listing your deductions, here are a few of the often overlooked deductions you don’t want to miss:

• Government Sales Taxes: Use this IRS calculator to estimate how much you can withhold.
• Tax Preparation Fees : Remember to deduct the cost of hiring a tax filler or using tax software in 2015.
• Job Search Expenses: You can deduct travel and other expenses such as preparing a resume.

Don’t forget to get all your credits as well. There is a tax credit on earned income, student loans , and savings loans .

Again, if you are using a professional or software that walks you through this process, you should have no problem getting all your credits, benefits, and deductions.

If you file a paper return without the help of the compiler, you will have to mail it in. You can see where to mail it here . Most post offices also offer extended hours for mailing tax returns, and GOBankingRates lists these extended hours by state.

Taxes are a pain, and when you put them off, they get worse when you rush to squeeze them into your schedule by the deadline. It helps you figure out your options and then set aside a couple of hours to work through them, and these steps should help you streamline the process.

More…