This Insights was contributed by Richard Pasquantonio, CPA/CFF, CFE, CDFA (NC License Number 33577), an associate at Adam Shay CPA, PLLC.
Another tax season has come to a close.
Many people associate April 15 with the final day for filing, but many Americans file for a six-month filing extension, making Oct. 15 (actually, Oct. 17 this year) the official end of the season.
One caveat - the 2016 tax filing season is technically not really over, as the government announced on Oct. 17 that individual returns extended in New Hanover, Brunswick, Pender and Onslow counties, among others, have additional time to file - but not to pay balances due - because of Hurricane Matthew.
Regardless of this year’s exact filing deadline, once it has passed, what happens if you did not file? What are you supposed to do?
The short answer is: File them ASAP!
Listen, it's OK. It happens to a lot of people. Pick up the phone or do a Google search for "CPA Wilmington NC.” Meet with a couple of CPAs and find someone you feel comfortable talking to and working with.
Don’t postpone it any longer. I have seen one year turn into two, two to three and before you know it you have a real problem on your hands. It's quite possible that a record of good compliance in the past will assist you in reducing or eliminating the penalties associated with filing a late tax return.
Every day you wait to file and pay your taxes is costing you more money in penalties and interest. If you continue to wait, the interest and penalties can as much as double the amount you owe.
There are a number of reasons people may not "want" to file their taxes, but the three reasons I see most often in our practice are:
- Uncertainty about reporting a unique transaction
- Unexpectedly owing taxes and not having the money to pay.
- Incapacitation due to health problems or an injury
Filing your own taxes is easier than ever. There are many simple and inexpensive ways for people to prepare and e-file their returns themselves, and for some people it is a good option.
Occasionally, circumstances change. Maybe you decided to start a small business or buy a rental property. Or perhaps you want to begin investing in the stock market. It could be that your credit card company has agreed to accept less money that you owe them.
All of these circumstances increase the complexity of your tax return. As a result, many people simply wait too long before getting a professional involved.
Not enough money to pay what is owed
An unexpected tax bill can send a person into panic. However, facing the problem is probably the least costly way of dealing with it.
Again, do not postpone filing the return. There are separate penalties assessed for a failure to file and for a failure to pay. The longer you wait the more it's going to cost you. The failure to file penalties is typically the most costly.
There are a number of alternative payment plans offered by the IRS depending on how much you owe. The most common are the streamlined installment agreement and the traditional installment agreement.
If you owe less than $50,000, you’re permitted to pay the balance monthly over a six-year period and you do not have to provide the IRS with any documentation. This is called a streamlined installment agreement. You can set it up online or over the phone but it may be a good idea to have a CPA review the return to make sure the amount of tax being reported is correct.
If you owe more than $50,000, the process is called a traditional installment agreement. It’s more onerous and the payment terms are less attractive. Typically the IRS requires the tax to be paid within three years and the taxpayer must submit a personal financial statement documenting all of the numbers that they report. I highly recommend hiring a professional to assist with a traditional installment agreement.
Life can present many trials and tribulations. When you or a family member is sick - or worse - everything takes a backburner to care and prayer.
In these instances, it is important that you take care of filing your taxes as soon as the trouble passes.
The IRS allows for abatement of penalties when a taxpayer is faced with death, serious illness or unavoidable absences. In order to be successful at obtaining an abatement, format, formality and persistence are critical.
A successful request needs to contain well-documented facts and must rely on IRS code, U.S. Treasury regulations and court case citations.
Most people do not intend on missing the tax deadline. Once it has passed, it can feel helpless, embarrassing or overwhelming. But it is not the end of the world.
I hope this article motivates people not to wait and instead take actions now. If you need help, seek it out.
Richard Pasquantonio, CPA/CFF, CFE, CDFA (NC License Number 33577), is an associate at Adam Shay CPA, PLLC. He focuses on forensic accounting, fraud prevention and detection, and tax controversy resolution. He is also an AICPA CFF Champion. The purpose of the CFF Champion program is to inform the professional community about the vital role of forensic accounting professionals, the knowledge required to become a CFF, and the benefits of the CFF credential. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. Pasquantonio can also be reached by phone at (910) 256-3456.
Adam Shay, CPA (N.C. License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at (910) 256-3456.