04/16/2001
Previous | Next | Personal Finance Home | Career Corner | Health | Issues
You have procrastinated yourself into another hole. It's time to panic.
But wait. There is a way for you to get a last-minute reprieve. And you are not alone.
About 8 million taxpayers who don't quite have it all together tax-wise yet will fall back this year on good old Form 4868, the Internal Revenue Service application for extension of time to file.
Beware, though: the leniency applies to your paperwork, not your pocketbook. The agency expects you to estimate the taxes you owe and send the balance due on its way by midnight Monday.
Failure to do so could start the meter running on substantial interest and penalty fees.
The surest way to avoid late charges is to make sure that by April 16 -- the deadline was extended a day because the 15th was a Sunday -- you've paid in, via withholding or by sending payment directly, at least as much for 2000 as your total tax bill in 1999. (Or 108.6 percent of 1999 tax, for filers with adjusted gross income greater than $150,000.)
Estimated tax penalties will be waived if withholding and payments total at least 90 percent of what you end up owing for 2000 when you've completed the full return, or if tax due is less than $1,000.
"Generally, you can goof by 10 percent," said IRS spokeswoman Sarah Wreford. "If you have at least 90 percent of your tax paid no penalties will be assessed."
And if you owe more than 10 percent of your total tax, the estimated tax penalty will not be assessed if the balance due is less than $1,000, but a "failure to pay" penalty will be assessed. Both penalties apply if your balance due is more than $1,000."
The failure to pay penalty is one-half percent of tax due per month, to a maximum of five percent. Estimated tax penalty varies by taxpayer because it's based on the level of taxes paid during the tax year.
There is no fine for failing to file on time if you are owed a refund. Penalties may be waived for people who retired or became disabled during the year the tax payment was due.
New this year, the federal extension may be requested via telephone. (Note: phone lines likely will be jammed today.) The automated service is available 24 hours a day at (888) 796-1074. Have a copy of last year's federal return in hand, Wreford said, because you'll be asked to punch in your 1999 adjusted gross income and total tax paid for identification purposes.
The toll-free number is a great innovation with one catch: You must pay any tax due at the time you make the call. The service is free of charge if you authorize a direct debit from your checking or savings account. (Be sure to have the account number and bank routing number on hand.) Filers may also pay by credit card, but be aware that the third-party payment processing firms tack on fees of about $25 for every $1,000 in credit card payments.
If you don't want to pay via phone, you'll need to file your extension request the old-fashioned way, using IRS Form 4868. Be sure to tuck in a check if you owe, payable to the United States Treasury. Write your Social Security number, daytime phone number and "2000 Form 4868" on the check.
It's also possible to electronically file Form 4868 using tax preparation software for personal computers. You may either authorize a direct debit or send a check separately.
State treasury departments usually will grant an extension on state returns if you've requested a federal extension, but you'll need to fill out a state form (check with your state agency).
State taxes due, however, must usually be posted by midnight Monday or penalties will apply. Interest charges also apply, and the penalty increases monthly.
People who are unable to file federal returns by August 15 may request an additional two-month grace period, extending their filing deadline to October 15. But this time you have to have a good excuse: say your employer still hasn't provided a W-2, your accountant's office burned down with all of your records in it, or some other catastrophe unrelated to your own procrastination.
"Not getting around to it isn't going to get you another two months," said Wreford. "And if we deny the extension you'll have a 10-day grace period in which to file your return."
(c) 2001 The Detroit NewsThe views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal, financial, or medical professional.