Listen to the Podcast:
Watch the Podcast (on 10/15)
It’s TaxQuips time from TaxMama.com.
Today TaxMama® wants talk to you about the final income filing deadline for this year’s tax returns.
Dear Family,
Every year we get to this point in time. Getting down to the wire.
In private social media forums, tax professionals are posting notes and screams of frustration, dealing with clients showing up at the last minute with surprise income, off-handedly mentioning – Oh, I sold that property last year, or mention of an LLC they opened that they forgot to bring up earlier. Or still not providing the missing documents or expense summaries the tax pros have been requesting for months. And then there are those charming folks who think it’s fun to walk into their tax pro’s office two days before the final filing deadline, all ready to sit down and get the tax return prepared on the spot. (I have a friend who thinks that’s cute – he’s not a client, though.)
Let’s face a few realities, my friends.
This has been a tremendously stressful year – on so many levels. Aside from the COVID dangers, Congress has been passing laws in 2020 and 2021 that they expect taxpayers, tax professionals and the IRS to understand and implement – some of the laws being retroactive for the last year or two. In addition to tax compliance and enforcement, Congress has tasked the IRS with issuing several series of payments to taxpayers – and the IRS is trying so hard to make the information easier for taxpayers to find that they simply don’t have time to answer all the questions people have.
And with everyone working from home, the IRS is totally behind on opening paper mail, including payments people have made – so the IRS computers are spewing out past due notices to people who have already paid their taxes.
This year is a total mess. But that doesn’t mean you’re off the hook about meeting this October 15th filing deadline. (Unless you live in a disaster area. Then you still have more time.)
My message to you?
If you haven’t already filed your tax return, finish up and do it IMMEDIATELY!
Today. File it electronically and keep an eye out for rejections, so you or your tax pro can fix the problem quickly.
But, you don’t have all the information?
Too darn bad! You have had over 9 months to gather the data. If you don’t already have it all – make your best estimate of the missing income or expenses. Include a disclosure statement, Form 8275, to explain why you have estimated amounts – and that you will amend your tax return as soon as you get the correct data.
Why should you file a tax return with estimates, instead of waiting until you get all the numbers?
- Your extension will run out on October 15th. The non-filing penalty is 5% per month for up to 5 months. That’s 25%. Does that start in October or April? I believe it starts in October.
- But the late payment penalty of ½% per month started in April, if you didn’t pay all the taxes you expected to owe for last year at the time you filed the extension. (So you’re already up to 7 months of late payment penalties plus interest.)
- In order to claim certain tax breaks and credits, you must file the tax return on time. They don’t work on late returns.
- Folks who miss this filing deadline often get stymied about what to do in the following year – and it starts a pattern of non-filing for the next few years until they get things sorted out. This ends up becoming very, very expensive.
Oh yeah, There’s More Due tomorrow
Yup. In addition to the final filing deadline for the prior year, you have the 3rd quarter estimated tax payment due for the current year.
Paying this is especially important if you find yourself owing more than you can pay for last year and/or earlier years. To get the IRS to agree to an Offer in Compromise or Installment Agreement, or any other breaks for past due balances, you must be current on this year’s withholding or estimated taxes. So, catch up – and pay online only, to ensure that your payment is credited to your taxpayer account – be sure to put the correct year on the payment – https://www.irs.gov/payments . Do not send paper checks – they are taking too long to post to taxpayer’s accounts.
This is also a good time to schedule a meeting to review your tax situation for the past year. Your tax pro is going to want a break, desperately. So schedule your meeting for next month.
We know there will be more legislation coming from Congress this year. And we already know it’s going change a great many issues in your tax life – probably retroactive to the beginning of this year – after it’s (nearly) too late to change what you’ve done. So expect next year to be a challenge as well.
I will keep you updated once they actually pass the legislation – hopefully before the end of December!
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At https://iTaxMama.com/AskQuestion
