From The California Society of Enrolled Agents: Don't Make the Worst Tax-Time Error

SACRAMENTO, Calif., Feb. 4 /PRNewswire-USNewswire/ -- Some taxpayers who can't pay the full amount they owe on the tax deadline are going to make a terrible decision, predicts David Shaw, EA, President of the California Society of Enrolled Agents. Enrolled Agents are tax professionals licensed by the federal government to assist taxpayers with tax planning, representation, and tax return preparation.

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"If you can't finish your taxes on time, or can't pay all of what you owe, you have several options. The worst possible choice, unfortunately, is the one opted for by many taxpayers – do nothing, don't pay, don't file," he says. "This is a terrible decision and a big mistake – it's not worth the aggravation and certainly not worth the heftier tax bills you're going to incur as a result."

Mr. Shaw offers the following advice to taxpayers who can't file their returns on time, or can't pay on time:

• File an Extension. A request for a six-month extension of time to file a tax return will automatically be granted by the IRS (use Form 4868). Remember, the tax liability must be properly estimated at the time of the request, because you could incur extra penalties by estimating too low.
• Request an Installment Agreement. The IRS will usually approve an Installment Agreement for taxpayers who owe less than $25,000 and who are current with their other taxes. Use Form 9465 to request an Installment Agreement; be sure to indicate the amount of your proposed monthly payment and the date each month you wish to make your payment. The Agreement covers payment of the balance due plus penalties and interest for a period of up to five years. The IRS charges a nominal fee for setting up an Agreement.

Whether or not you file an extension, you are still responsible for any taxes owed but not paid by April 15, including penalties and interest. Here's the big difference, though: If you file late without an extension, you'll owe an additional five percent per month of the balance due (up to a maximum of 25%) on top of the interest. With an extension, however, the penalty for late payment is much less, only one-half of one percent per month. With an installment agreement, it's even less, only one-quarter of one percent per month.

In California, there is a flat 5% penalty for any tax not paid by April 15, plus interest and additional penalties every month. The Franchise Tax Board routinely approves installment payment requests if the balance lowed is less than $25,000 and can be paid within 5 years. An EA can give you more information.

You can locate an Enrolled Agent in your area by calling toll free 1-800-TAXPRO-5 or online at www.csea.org. Outside California, the Enrolled Agent referral number is 800/424-4339.

The California Society of Enrolled Agents (CSEA) represents thousands of federally-licensed tax professionals, as well as affiliate and associate tax preparers. Enrolled Agents are licensed by the Department of the Treasury to advise and represent clients specifically in matters of taxation and to help ensure that all deductions and credits are applied accurately and fairly.

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David A. Shaw, EA

https://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=39241

SOURCE California Society of Enrolled Agents

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