Last Minute Tips For Monday’s Tax Return Extension Deadline

The deadline is here!

Monday October 17th, 2016 is the last day for the millions of people that filed an extension last April to complete their 2015 tax return (with the exception of certain victims of Hurricane Matthew who now have until March 15, 2017).

I feel a bit out of sorts, as this is my first extension deadline in almost a decade that I’m not a part of the final push. Despite being out of the tax-prep game, I want to offer some last-minute tips on meeting your filing obligations.

Understand What You’re Signing

I know it’s tempting to have a preparer complete the return and for you to sign it without reviewing it to speed up the filing process. Don’t do that. Even if someone else prepares the return, you are the one ultimately responsible for its content. 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 post regarding what you need to know.

File on Time

I want to reiterate that you will incur a pretty steep penalty for failing to file your return if you owe the government money. Make the return a priority so you can avoid the failure-to-file penalty and any interest that’s associated with the balance.

You should also keep in mind that this deadline only applies to you if you owe money on your tax return. If you are due a refund, you have three years from the due date, including extensions, or two years from when tax is paid, to file your return and collect your money. However, the longer you wait, the longer you give the IRS an interest free loan. So file as soon as you can.

What to do if You Can’t Pay the Balance

You may owe more on your tax return than you previously thought and can’t afford to pay the balance in full. That’s okay.

If you find yourself with income tax debt, take solace in knowing that you aren’t alone. I used to deal with people on a daily basis that owed the IRS as little as $10,000 to some that owed more than $1,000,000.

There are plenty of options in order to resolve your tax debt. Here are the three most common:

1. Installment Agreements

The first approach involves paying the IRS in installments. 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. Heads up – 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 than 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. These financial statements also play an important role in the other resolutions you may obtain.

2. Currently-Not-Collectible Status

If your financial statement shows that your expenses outweigh your income, and you don’t have assets that can pay your debt in full, then you qualify for Current-Not-Collectible (CNC) status.  In this resolution, you don’t have to pay anything towards your debt, like a student loan forbearance, but interest and penalties continue to accrue while your debt isn’t paid. The IRS may also review your account in a year or two to see if your financial situation has improved enough where you can make monthly payments. However, there are some situations where you could be in that status for the entire period the IRS has to collect the debt – the collection statute expiration date (CSED). The CSED is usually 10 years from the date the tax is assessed barring any extension of the statute.  For more information on CNC, see Internal Revenue Manual 5.16.1.

3. Offer in Compromise

The last resolution I want to cover is the offer in compromise. With this agreement , you pay the IRS a percentage of what you owe. And once you pay that amount, the rest of your debt is forgiven. This type of resolution is most of attractive because you pay less than you owe and have more finality than you would in something like CNC.

Unfortunately it’s not as easy as calling the IRS and offering whatever you want. You have to fill out a financial statement: this time a 433-A (OIC)). In addition, you have to fill out Form 656, outlining your offer amount and why you think the offer should be accepted. The offer amount is based off of your disposable income and equity in assets. As of late, it has taken a long time to get the offers processed. However, if you think you qualify, it could be a great way to get a fresh start.

These are just three ways to resolve your debt. You can also pursue other options like audit reconsideration, penalty abatement, and innocent/injured spouse. I will cover these resolutions in later posts.



I know these last couple of days will produce a lot of  anxiety to those still needing to file. Hopefully this information will provide some solace since you know the rules of the game. If you are still overwhelmed and need guidance, it’s best to contact a tax professional – either a lawyer, CPA, or Enrolled Agent – that is authorized to represent you before the IRS.