If youve left your tax return for the last minute, or dont have the cash just yet to pay Uncle Sam, you may be relieved to know that you can squeeze a few more days out of the calendar before filing your taxes.
This years filing deadline is Monday, April 18, thanks to a legal holiday hitting on April 16. Washington, D.C.s Emancipation Day celebrates when the nations capital abolished slavery, and the holiday falls on the calendar this year on Saturday. Since thats not a workday, the legal holiday falls on Friday, April 15, and gives people three more days than usual to finish their state and federal tax returns and pay taxes.
In addition to providing a little more time to submit tax returns, this year the IRS has announced a new way people who dont have checking accounts or credit cards can pay taxes with cash at 7-Eleven stores. This frees people from having to travel to IRS Taxpayer Assistance Centers that take cash, said IRS Commissioner John Koskinen in a release. People also will probably save some time, since assistance centers are likely to be swamped this late in the tax filing process.
About 7,000 7-Eleven stores are participating nationwide. Yet the IRS warns not to wait until the last minute to go because the process isnt as simple as showing up at a store and paying. You will need to go online and follow the IRS PayNearMe instructions to file your intent to pay at a store before turning over the cash. There is a $3.99 fee.
To avoid fraud, the IRS warns individuals to use the official IRS website and only 7-Eleven stores. Beware of any email that comes directly to you offering a chance to pay taxes in cash. The IRS will not reach out to people to suggest cash payments, but it will send taxpayers a payment code through OfficialPayments.com.
If you are not using cash, the most efficient way to pay taxes is by filing online and using the IRS Direct Pay plan.
People who do not have enough cash available to pay taxes can use a credit card. But Chicago-area certified public accountant Linda Forman notes that there are fees up of up 2.5 percent for paying with a credit card.
Keep that in mind if trying to win rewards with a credit card, she said.
As April 18 approaches, if you still cant get the paperwork done on time, you can file for an extension. But remember that filing for an extension simply allows you more time to fill out your tax return, notes Forman. It doesnt give you relief on paying your taxes.
With an extension, you estimate what your taxes will be. You must pay at least 90 percent of what you will owe the IRS, and paying less will mean you will be penalized by the IRS, said Forman.
Whatever you do, do not run and hide hoping that if you dont file your taxes by April 18 that the IRS wont notice, Forman said. The penalty for filing late is normally 5 percent each month for the taxes you owe. The penalty starts the day after the tax filing due date and can climb to as much as 25 percent of your unpaid taxes.
In addition, if you do not pay your taxes by the tax deadline, you will face a failure to pay penalty of a half of a percent of the taxes you owe.
So if you are feeling money pressures, file your tax return by April 18, pay whatever you can toward your taxes immediately and write to the IRS, explaining your hardship and a plan for paying taxes back completely. To ask for an installment plan that will allow you to make regular monthly payments into the future, go to the IRS website.
By going through this process, you wont avoid penalties or interest on the taxes you owe, but you will avoid the 5 percent monthly fee you would incur if you simply decided to ignore the IRS. If you have gone through a severe hardship such as a serious illness, injury, job loss or divorce, you might avoid penalties for six months by applying for a hardship with Form 1127.
To keep fees as low as possible, Forman encourages people to try to pay off all taxes owed within three months. Once a person has diligently paid taxes and interest each month, she suggests pointing out to the IRS that the taxpayer has done just as promised, and with the final payment request that penalties be waived.