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Friday, April 15, is the deadline for filing Form 1040. Miss it and you could get nicked for a sizable, nondeductible penalty.
In most cases, the penalty is 5 percent of the balance due (the amount that remains unpaid after subtractions for taxes previously paid through withholdings from wages during 2004 and payments of estimated payments) for each month, or portion of a month, that a 1040 is late.
The maximum penalty is 25 percent of the balance due. The tax collectors will waive a late-filing penalty if you are able to show "reasonable cause" for your tardinessódestruction of your records by flood or fire, for instance.
What if you do not have sufficient cash on hand to pay the balance due at filing time? Even if you are able to prove it, that is not reasonable cause that will relieve you of the penalty.
Not to worry if you need additional time to complete your return or just to avoid the late-filing penalty. It's easy to obtain a four-month automatic filing extension, moving the deadline back to Monday, August 15. By April 15, submit Form 4868, a simple-to-complete application for extension that you can get from the IRS, or file for an extension by phone (call toll-free 1-888-796-1074), using computer tax preparation software, or through a tax professional.
Note, though, that this will extend only the time you have to turn in your return, not the time for payment of taxes. True, the IRS does not require payment by April 15 of the tax you estimate as due. But failing to do so means you will owe nondeductible interest, which runs until payment of the tax. It is immaterial that you had a good reason for not paying on time; you will still owe interest. Moreover, you might be assessed a nondeductible late-payment penalty on the unpaid tax. When you finally file your return, be sure to enter any extension-related payment on Line 68 of Form 1040 as "amount paid with request for extension to file."
The IRS relaxes the rules for those who are unable to fully pay the balance due by April 15. Usually, it is easy to arrange for partial payments in installments by submission of Form 9465 (Installment Agreement Request), which allows you to request a monthly payment plan and specify the amounts you can pay each month and the monthly due date.
Different rules apply if you are unable to file by the extended deadline of August 15. File Form 2688 for another two-month extension, moving the deadline back to Monday, October 17 (the usual due date of the 15th falls on a Saturday). Unlike the first extension, this second one is not automatic. You have to cite a beyond-your-control reason, such as a health emergency or the unavailability of records, as in a situation where they are in the possession of your future ex-spouse who refuses to make them available until the divorce becomes final. Another stipulation is that you've previously submitted the 4868 form. Otherwise, the IRS usually denies an additional extension.
State Tax Returns: Some states accept Form 4868 for extending their due date; some require their own extension forms. Check the rules of the state in which you have to file returns including penalties for any underpayments of taxes.
Margaret Mitchell's 1936 novel, "Gone with the Wind," is a romantic, panoramic portrait of the Civil War and Reconstruction periods in Georgia, not taxes. But Scarlet Ohara grouses that "Death and taxes and childbirth! There's never any convenient time for any of them!"
Leo Tolstoy's most popular work, "Anna Karenina," is the story of Anna, a fashionable married woman, who has an affair with Count Vronsky, a liaison that ends horribly when she throws herself under the wheels of a train. What if a film adaptation retains one of the most famous suicides in literary history, but shifts the locale from nineteenth century Russia to contemporary America? A suicidal Anna might tell the Count, "Oh, Vronsky, not another April 15. I just can't bear it. Where is the train?" Well, eighty-six the angst, Annichka; ask for an automatic extension.
It's not just Scarlet and Anna who are clueless about extensions. The Wall Street Journal of January 11, 1985, tells of the woman who asked the IRS for more time to file her return, saying: "My husband and my forms have been misplaced. Please send replacements." Unfortunately, the IRS says, "we could only replace the tax forms."
Julian Block is a
syndicated columnist, attorney and former IRS investigator who has been cited
by the New York Times as "a leading tax professional" and by the Wall Street
Journal as an "accomplished writer on taxes." His "Tax Tips For Freelance
Writers, Photographers and Artists" shows how to save truly big money on taxes
"legally" and explains the steps you should take to reduce taxes for this year
and even gain a head start for future years. Send $9.95 for an e-mailed copy
or $14.95 for a postpaid copy to:
You may e-mail Julian at firstname.lastname@example.org