Filing After April 15

The federal tax return filing deadline for tax year 2007 was Tuesday, April 15, 2008. If you missed the deadline and did not file for an extension, it's very important to file your taxes as soon as possible. Filing with TurboTax is fast and easy.

Didn't Get Your Taxes Done by April 15?

Here are answers to the most common questions related to filing your tax return after the deadline:

• I filed an extension. How long is it good for?
• What if I didn't ask for an extension?
• What if I owe the IRS but can't pay?
• Can I pay my tax by credit card?
• Can I pay my tax in installments over time?
• Does the IRS ever negotiate the amount owed?
• Can I get an extension of time to pay my tax?

I Filed for An Extension. How Long Is It Good For?

If you filed an extension by April 15, it buys you an extra six months, pushing your filing deadline to October 15, 2008. Unfortunately, an extension of time to file your return does not mean an extension of time to pay your taxes. If you expect to owe money, you're required to estimate the amount due and pay it with your form 4868. As long as you do that, the extension will be granted automatically.

What If I Didn't Ask for an Extension?

The consequences differ depending on whether you owe the IRS money or the IRS owes you a refund.

If You Are Getting a Refund

This is one of the great little secrets about the tax law. If you have a refund coming—as more than two-thirds of taxpayers do every year—then there is no penalty for failing to file your tax return by the deadline, even if you don't ask for an extension.

That's not to say there aren't darned good reasons for filing on time, though, even if you have a refund coming:

• You can't get your money back until you file, so you should file as soon as you can to get your money as soon as possible.
• If you are eligible for a government rebate (stimulus payment) as a result of the 2008 Economic Stimulus Plan, you can't receive it until you file your 2007 return.
• The statute of limitations for the IRS to audit your return starts at the later of the original due date or when you actually file your return. So, the sooner you file, the sooner the clock starts ticking.
• Some rather arcane elections must be made by the due date, even if you have a refund coming. This applies to a very tiny percentage of taxpayers.

If You Have a Balance Due

If you have extended your return and didn't pay at least 100 percent of the tax you owe by April 15, you'll end up owing a late payment penalty of 0.5 percent per month until the tax is paid. The maximum late payment penalty is 25 percent of the amount due. You'll also owe interest on whatever amount you didn't pay by April 15. The rate being charged by the IRS in the fourth quarter of 2007 was 8 percent.

If you didn't get an extension and still owe a balance due you are looking at a late filing penalty of 5 percent of the unpaid tax per year plus interest. The maximum late filing penalty is 25 percent of amount due.

Beware: No Statute of Limitations

Regardless of whether you are due a refund or owe, there is another point to keep in mind. If you never file your return there is no limit on how many years the IRS can go back to assess and collect tax.

So, one way or the other, there are compelling reasons to get on with it and file your return.

What If I Owe the IRS But Can’t Pay?

If you find yourself in this situation, you have a few options available, ranging from credit card payments to installment agreements to "offers in compromise".

You can also simply file your return and wait for the IRS to bill you. Don't be surprised if the bill includes interest and penalties. There is also a form that can be filed to request an extension of time to pay your tax, but the legal requirements are strict. More on these options follows.

Can I Pay My Tax by Credit Card?

Yes, you can pay your tax bill with credit in a variety of ways.

Credit card and bank loans are both payment options. You can apply for a bank loan, home equity loan, or take a cash advance on a credit card to pay your tax bill.

Third party providers like Official Payments Corporation are also available to facilitate using a credit card to pay your tax bill. These companies charge a convenience fee for their service; that fee is in addition to any interest and finance charges your credit card company may charge you. Some folks seem to think that paying with a credit card is a cool way to earn credit card points. However, the fee for using the card is likely to outweigh the value of the points.

Can I Pay My Tax in Installments Over Time?

If you find yourself in that unenviable position, you should still file a return. That protects you from the late-filing penalty that otherwise would keep digging you deeper into a hole. That penalty mounts up at a rate of 5 percent of what you owe per month. You avoid that penalty by sending in your return, even if you don't enclose a check for the balance due.

Attach to your tax return a Form 9465 Installment Agreement Request, asking the IRS to set up a monthly payment plan to pay off what you owe. That's not as unusual as you might imagine: About 2.5 million taxpayers are currently paying off their bills under such an arrangement and recently the IRS made it easier to qualify. In the past, before the IRS would okay an installment plan, the agency demanded a look at your finances—your assets, liabilities, cash flow and so on—so it could decide how much you could afford to pay. That's no longer required in cases where the amount owed is under $25,000 and the proposed payment plan doesn't stretch over more than five years. You can also now apply for the installment agreement online at the IRS website.

Don't think the IRS is a patsy, though. You may be better off if you can borrow the money to pay your bill, rather than go on an installment plan which means, effectively, borrowing from the IRS. First of all, the IRS charges a $52 fee to set up an installment payment plan for direct debit; $105 for non-direct debit agreements. (For eligible low-income individuals, the fee is $43.) The IRS interest rate on late payments was 8 percent for the fourth quarter of 2007 and can change quarterly. That might not sound bad, but that's not all you have to pay, either. There's also a late-payment penalty of 1/4 of 1 percent a month. The 8 percent interest rate plus 1/4 of 1 percent a month adds up to the equivalent of 11 percent a year. Of course, that's a heck of a lot better than most credit cards.

Does the IRS Ever Negotiate the Amount Owed?

An “offer in compromise” is an agreement between a taxpayer and the IRS that settles the taxpayer's tax debt. Under certain circumstances the IRS is authorized to resolve a tax liability by accepting less than full payment. There are three circumstances under which the IRS is authorized to compromise:

1. When there is doubt that the tax is correct.
2. When there is doubt that you could ever pay the tax in full.
3. When the tax is correct and you could pay it but payment would result in an exceptional circumstance economic hardship or be unfair and inequitable.

Form 656, Offer in Compromise Package should be completed to file an Offer in Compromise with the IRS. Included with the Form 656 package are Form 433-A, Collection Information Statement for Wage Earners & Self-Employed Individuals and Form 433-B, Collection Information Statement for Businesses; you may need to complete the appropriate Form 433 and should be prepared to provide other documentation and explanations as they are requested.

Various options are available for accepted Offers in Compromise requests, such as a reduced total payment and scheduled monthly payments. Defaulting on an accepted offer in compromise can result in the IRS filing suit against you and reinstatement of the original tax debt, plus interest and penalties.

Can I Get an Extension of Time to Pay My Tax?

An extension of time for payment of tax can be filed with the IRS on Form 1127, Application for Extension of Time for Payment of Tax, but the legal requirements are strict:

• Form 1127 must be received by the IRS on or before the date that the tax is due.
• You must provide a complete statement of all your assets and liabilities at the end of the last month and an itemized list of money you received and spent for the three months immediately prior to sending in the extension to pay request.
• You must demonstrate that paying the tax when due would result in undue hardship; simple inconvenience is not enough of a hardship to qualify.
• You need to show that paying the tax when due would result in a substantial financial loss and that you don't have the cash, or can't raise the money by selling property or through borrowing.

When approved, extensions to pay are generally limited to six months. Plus, the IRS requires some acceptable form of security before granting an extension of time to pay. The security may be in the form of a bond, notice of lien, mortgage, or other means, depending upon individual circumstances.

Additional Resources

For more information on filing taxes after April 15, see Filing Returns After the Deadline.

Updated for tax year 2007