The IRS estimates that as many as 20 percent of all Americans wait until the last two weeks of the tax filing season to submit their return to Uncle Sam. For taxpayers who have not yet filed their returns, today may seem like a mad rush to the finish line, but there are a few things to keep in mind to help ensure you don’t miss the deadline and, if you do, ways to avoid paying penalties.
• With no time to spare, online tax preparation and e-filing is the way to go. This year, taxpayers can file right up to 11:59 p.m. local time on April 17. E-filing has the added benefit of helping taxpayers get their refund faster and provides confirmation that the IRS has received their return, especially important for late filers.
• If you aren’t going to make the deadline, make sure you file for an extension. Filing an extension will give you until Oct. 15, 2012 to file your tax return, but remember this is an extension of time to file and not an extension to pay. If you owe money, you need to pay (within 90 percent accuracy) by April 17 to avoid late penalties. The IRS can impose a penalty of 5 percent of the tax you owe for each month you do not file your return.
• Some taxpayers are automatically granted extensions for filing. Make sure to check the following to see if any apply to you:
o Living and working abroad: You have until June 15 to file if you are currently living and working abroad. You still need to pay by tonight though.
o Serve in a combat zone: If you are serving in Iraq, Afghanistan or other combat zones, you have until 180 days after you leave the combat zone to file and pay your taxes.
o Victim of a natural disaster: If you live in an area affected by a natural disaster, you may have until May 31 to file and pay. Make sure to check which disaster areas have been granted an extension here.
• What if you can’t afford to pay your taxes? There is some good news: The IRS has expanded its assistance to taxpayers having financial difficulty paying tax due on their 2011 tax returns. The new assistance, part of the IRS “Fresh Start” initiative, provides penalty relief for the unemployed and also doubles the dollar threshold for taxpayers seeking installment agreements. Note, you still need to file your return by April 17, even if you are going to apply for one of the IRS payment plans.
o Unemployed: For taxpayers who were unemployed for 30 days or longer in 2011 or 2012, the IRS’ “Fresh Start” initiative gives you until Oct. 15, 2012 to pay your taxes. You will still be charged interest on your balance owed, but will not receive a penalty. To be eligible, you must meet certain income qualifications and apply for Form 1127A: Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship on the IRS website. But remember, you need to file both your 2011 tax return and Form 1127A by April 17.
o Payment plans: Taxpayers who cannot pay their full bill can request a streamlined installment plan or “installment agreement” through the IRS. You may qualify for an Installment Agreement as long as you don't owe more than $50,000, and you must be able to pay your tax bill off within six years. To see if you qualify for an installment agreement, visit this checklist on the IRS website.
Remember, it is not too late to go online and e-file your taxes – you have until the clock strikes midnight!
Lisa Greene-Lewis is a CPA and TurboTax Tax Expert. Lisa has 15 years of experience in tax preparation, inlcuding positions as a public auditor, controller, and operations manager. Lisa is currently the editor of the TurboTax Blog.