Haven’t Filed Your Taxes Yet?  Don’t worry. You Still Have Options.

The first tax deadline is less than two weeks away. And even with an extra three days until April 18th, I know some of you are scrambling to get your information together.

First things first – don’t panic. You still have time to gather all of your income documents and either enter them into your software or get the information to your preparer. And if not, you can always get more time to file. Today, I’ll cover how to do that, as well as other last-minute tips for filing.

 How to Request More Time to File

The all-important form that you need to request an extension is Form 4868. You can file the form online if you or your tax professional has Efile access. Or you can mail the paper form into one of the IRS service centers. (You can find your particular service center on the form’s instructions.)  If you choose to mail the form, make sure to get it postmarked by 4/18. 

The 4868 is pretty straightforward. You fill in your contact information (name, address, and social security number), estimate your tax liability, and make a payment if you need to.

Some people freak out about the balance due estimation because the IRS says in the instructions: “If we later find that the estimate was not reasonable, the extension will be null and void.“ However, you just need to make the best estimation with the information you have.

So, if you had a balance the year before and are making a similar amount of income, you will likely owe about the same. You can also adjust accordingly for any increase or decreases in your income.

If the IRS accepts your extension request, you get an additional six months to file your return. You should know that the extension only gives you additional time to file, not to pay.  If it turns out that you didn’t properly estimate your balance due, you will owe interest when you do file and may incur a failure to pay penalty. (Although owing a balance or filing the form without payment doesn’t negate the extension.)

The last thing to keep in mind is that you don’t need to file an extension if you know you’re getting a refund. A refund means the Government actually owes you money. You have three years from the return due date to file your return and still receive the refund. I suggest you file as soon as possible to start putting your money to work.

Watch Out for Those Penalties

If you don’t file on time or file an extension, you will be penalized.

The most substantial penalty you face for missing the deadline is the failure-to-file penalty. As the name indicates, you incur the penalty for failing to file on time.  Again, you can skirt this penalty by filing Form 4868. Unfortunately, there’s no way to avoid this penalty if you miss the second deadline.

The failure-to-file penalty is 5 percent of the unpaid taxes for each month or part of a month that your return is late, up to 25% of the unpaid taxes.  If you file your return more than 60 days after the due date, the minimum penalty is the smaller of $135 or the unpaid tax.

Along with the failure-to-file penalty, you will likely receive the failure-to-pay penalty. Again, the name is pretty self-explanatory: you incur this penalty for not paying your tax balance on time. The failure-to-pay penalty is ½ of 1 (.05) percent of your unpaid taxes for each month or part of a month you have not paid after the due date.

Like the failure-to-file penalty, this penalty can rise as high as 25% of your unpaid taxes. However, unlike the failure-to-file penalty, the failure-to-pay penalty isn’t avoided when you file an extension on the initial filing deadline. You have to pay at least 90% of your tax liability by the original April due date and the balance by the extension date, if you want to avoid the failure to pay penalty. You may get a small reduction in penalties if you incur them together.

You Have Options If You Can’t Pay the Amount You Owe

You may find that you owe more on your tax return than you previously thought and can’t afford to pay the balance in full. That’s okay. There are plenty of options in order to resolve your tax debt. For example, you can apply for an installment agreement or hardship status.

Under the IRS’ Fresh Start initiative, individual taxpayers that owe under $50,000 can easily set up a payment plan, if the taxpayer pays his or her debt in full within 72 months (6 years).  You can request the agreement online or mail in Form 9465 to a service center. Keep in mind that it may take a while for an installment agreement requested through the mail to be set up, as the service centers are really behind.

If you need longer the 72 months to pay your debt or you owe over $50,000 the IRS will request a Collection Information Statement (Form 433-A or Form 433-F). These forms provide an in-depth analysis of your assets, as well as your income and expenses to help determine what you can pay on a regular basis. For example, if the financial statement shows that you can only afford $400 a month after you’ve paid your necessary expenses, that will be the amount of your installment agreement. If the financial statement shows that you can’t pay anything, you can be placed in currently-not-collectible status or hardship status.

Know What You’re Signing

Last, but certainly not least, remember to review what you sign. Because of the tight time frame, it’s tempting to have a preparer complete the return and for you to sign it without reviewing it in order to get it filed as quickly as you can.

Don’t do that.

Even if someone else prepares the return, you are the one ultimately responsible for its content. And your preparer is more likely to make a mistake in the mad rush to complete everything before the deadline. So take the time to understand your income and deductions for 2015. For an overview on how returns work, you can check out my previous regarding what you need to know.

Good luck with the push before the deadline!