If you still have not filed your taxes for 2022, don’t panic. The IRS estimates that 1/3 of Americans wait until the last minute to complete their tax preparation. It is not the ideal way to handle your tax return, but it’s not too late to get all of your documentation in order and file an accurate return that includes all of the tax credits and tax deductions you are entitled to claim. The important thing is to get started now and commit to filing what you need by the April 18th deadline.
Despite the impending deadline, it is important to be thorough and organized in your preparation. The first step in filing an accurate tax return that does not leave money on the table for the IRS that you could keep in your pocket is to gather all of your documentation before you begin filling out your tax forms. For help organizing everything that you need, see our post titled, “Preparing for Your Tax Appointment”. This guide will help you make sure you have everything you need for your tax appointment.
Commit to Filing on Time.
If you can not gather the required documents and fill out your 1040 by April 18th, don't make the mistake of not filing anything. At the very least, file an extension. You can do this by filling out the very brief Form 4868, on which you will make your best estimate of your tax obligation based on the information you have. Granting of an extension is automatic, provided you follow the simple instructions, and it gives you an extra six months to complete your return.
Keep in mind that filing an extension only extends the time you have to submit a completed tax return, not the time that you have to pay your taxes. You will avoid penalties only if you pay at least 90% of the taxes you actually owe, so do your best to estimate accurately, or at least err on the side of caution and overpay.
Pay What You Can
If you can’t pay the entirety of what you owe by April 18th, don’t let this fact keep you from filing on time. Although you will incur a 0.5% monthly penalty for delaying payment, this on only 1/10 the penalty for failing to file on time. The failure-to-file penalty begins with a minimum of $135 and can grow as high as 25% of your unpaid balance.
The IRS offers installment plans, which cuts the late payment penalty in half, from 0.5% to 0.25% per month. It costs $120 to apply for a standard agreement or payroll deduction agreement or $52 for a Direct Debit agreement.
Consider an Offer in Compromise.
If the amount you owe is truly more than you can pay, you may be able to get your balance reduced. To submit an offer in compromise, you must first complete the Offer in Compromise Pre-Qualifier. You will supply information about your financial status, assets, income, expenses, and the payment plan you propose. If the IRS believes that your offer is the most they can fairly collect within a reasonable timeframe, then it will likely be approved. You must include a $186 nonrefundable application fee and an initial payment that is at least 20% of your total offer. Find more information about offers in compromise on the IRS website.
Get Help From a Professional
Hiring a professional tax preparer can take a lot of the stress out of tax filing. As long as you get all of your documents in order, a qualified tax professional can make sure that you claim all of the tax benefits to which you are entitled to and don't pay the IRS more than necessary. Remember that not all tax preparers are equal. For guidance in finding the best tax professional for your needs, read our blog “4 Questions to Help You Find the Right Tax Preparer.”
The CPAs at Boelman Shaw Tax & Financial Planning can assist you with preparing your income taxes as well as represent you with the IRS in case issues arise with your return. If you have procrastinated in filing your 2022 taxes, hesitate no longer. Take control of your situation. Gather your documents and schedule your tax appointment today by calling (515) 225-1185.
Tax and accounting services provided through Boelman Shaw & Company, LLC. Advisory services provided through BSC Capital Partners, LLC a state of Iowa registered investment advisor.