The deadline for filing your federal income tax return with the Internal Revenue Service has passed. It’s a time of year in which sighs of relief are heard across the nation – unless, of course, you are one of the people who did not meet the deadline and did file for an extension. In that case, the clock is ticking.
Penalties and interest are accruing. The IRS is waiting to hear from you.
If you did file for an extension, remember that the extension is for filing only – you were still required to pay Uncle Sam any owed taxes a few weeks ago. A certified public accountant who recently wrote a column on late filings said he tells clients “not to get too crazy or panic over this.” After all, the late payment penalty rate is one half of one percent each month. Interest is 3 percent.
So unless you owe the IRS enormous sums, your penalties and interest with a filing extension should be manageable, at least in the short term. If you did not get an extension, the price is a bit steeper: there is a late filing penalty of 5 percent per month piled on top of the previous penalty and interest.
Again, depending on circumstances, the amount owed might well be manageable for a short time.
But what happens when you get a letter in the mail from the IRS, stating in black and white the amounts owed? What then?
The CPA says you should either call the IRS and set up an installment plan or go to the IRS website and apply there for a payment agreement. The accountant urges anyone in this position to speak with a professional before calling or contacting the IRS.
Naturally, if your problems with the agency go beyond simple late fees and interest, you have even more incentive to do so. That's when it's important to talk with a tax attorney becasue after all, encounters with the IRS can go quickly downhill if you are angry, nervous or frightened. Those kinds of exchanges can do more harm than good.