How to Handle Overdue Payments and Late Income Tax Returns

tax planning chicagoSo, you wake up on Wednesday April 19th, 2017, and feel that something is inherently wrong. A cloud hangs over your head, yet you can’t put a finger on what exactly is the trouble. Then it dawns on you. The tax deadline of April 18th has already passed and you’ve failed to file your returns! Fear not. This is an annual concern that we at Accounting Solutions Ltd. are accustomed to dealing with. Just as we do our best to prepare our beloved clients with information pertaining to changes in tax rules and regulations, we also offer advice regarding scenarios such as these. The IRS is very familiar with these issues and offers many options. So don’t panic and wait to complete your returns until next next year. By then, the penalties and interest will multiply. Here are some ideas on how to handle this situation…

  • Gather up all of the information and documents you’ll need to get your return properly processed. This should include any statements regarding income and deductions for the period in which the return applies. If you can, you should fill out a tax organizer to make sure that you are getting every possible deduction. Even if you’re late, it’s important to realize that the sooner you complete your return, the sooner you’ll receive a refund, hopefully. If, on the other hand you owe tax, it should be paid immediately to reduce any interest and penalty.
  • If you owe the IRS a large chunk of money but are unable to pay in full, depending on the amount, they will accept incremental payments. So pay as much as you can in order to decrease the balance on your actual return. The best way to handle this situation is to notify the IRS of your plans to pay the bill. If the agency doesn’t see some sort of action on your file after a certain period of time, they will probably pursue it further. This in turn, would cause future financial problems. Luckily, they are accustomed to helping taxpayers who deal with monetary hardships, and will probably work with you to resolve the situation.
  • There are a multitude of options that you can use to make your payments in full. These include credit card payments, electronic transfers, cash, money orders, or checks. If you use a credit or debit card to pay, there will be no additional fees from the IRS directly. But the related processing companies can charge for their services.
  • If you are unable to make a full payment, there are a number of paths that you may explore in order to help alleviate the situation. These circumstances are typically dealt with on a case-by-case basis and may include installment agreements or an Offer In Compromise.
  • IRS Direct Pay is an efficient and totally cost-free method of paying your taxes directly from your personal bank account. This system can also be used if you have an installment agreement.
  • Please realize that an extension only extends the due date of the return. It does not extend the date that your payment was due. If your return was due on April 17th, and you file a six month extension, then your return will be due in October. But if you end up owing money on the return there will be a penalty because the payment was due back on April 17th. This, of course, is illogical. How can you possibly know what to pay if the return isn’t done yet? But welcome to silliness of tax law. So, if you are at all concerned about owing tax, make sure to make a deposit with your extension.

Paying your taxes, and ensuring that you get the monetary return that properly reflects your hard work, are important things that are tracked diligently by the IRS. If you wake up one morning and realize that you have failed to follow any of these steps, don’t panic. Stay calm and continue to follow the steps mentioned in this article. By failing to address any unpaid debts, you are simply digging yourself a deeper hole. If you wish to discuss any these situations, or simply wish to inquire about finding an accountant that works for you, please don’t hesitate to give Accounting Solutions Ltd. a call!