If you missed the April 18th deadline to file your 2010 Tax Return, it’s not too late. While you consider whether it’s worth the hassle to file your late return, here’s some things to keep in mind:
PENALTIES AND INTEREST. For every day your tax return is late, filing penalties, payment penalties, and interest will incur on any tax you owe.
THE IRS WILL FILL OUT YOUR RETURN FOR YOU. If the IRS receives your tax information from a third party (employers, banks, investment accounts, etc.), the IRS will then fill out your return for you, while assessing tax, penalties, and interest. THIS IS BAD! The IRS does NOT consider personal exemptions, deductions, credits, etc. when completing your return. Accordingly, this often results in an overestimate of taxes, penalties, and interest due because the IRS is using incomplete and/or incorrect information!
Once the IRS fills out a substitute return, you become subject to the IRS collection procedures for outstanding balance – according to their calculations. This procedure can include a levy on wages or bank accounts, and filing a federal tax lien against your property and assets! This is NOT a process that you want the IRS to start, especially if owe a relatively small amount of tax.
YOU ARE DUE A TAX REFUND. Even if you think you are due a refund, you still need to file. The IRS only gives you three years from the tax return due date to subsequently file and receive a refund from that tax year – otherwise the government keeps your refund!
OPTIONS IF YOU CAN’T PAY THE TAX NOW. If you did not file because you can’t afford to pay the tax, consider filing an extension or setting up a payment plan with the IRS. Even if your failure to file is due to financial hardship, you nonetheless are on the hook for getting your return filed. The Taxpayer Advocate Service or a Low Income Tax Clinic may be able to assist you if you are unable to file due to financial hardship. You can find a Low Income Tax Clinic near you at http://www.irs.gov/pub/irs-utl/pub._4134-04.pdf
MOST IMPORTANTLY: If you missed the Tax Return filing deadline, FILE A RETURN OR EXTENSION IMMEDIATELY. As long as you file something, the IRS is more likely to work with you on a feasible payment plan. However, the IRS becomes much more difficult to work with once they begin sending you Assessment Notices. When dealing with the IRS, a couple of old adages hold true:
Since “nothing is certain but death and taxes,” it really is “better late than never” to file your Tax Return.