Published: April 14, 2009 10:19 pm      

Income tax filing deadline is here

It’s here, April 15, the deadline for filing income tax returns, and the IRS has some reassuring words for procrastinators, especially those who can’t pay what they owe: Don’t panic.

The agency also has some advice: File a return anyway, or at least file for an extension.

“The worst thing you can ever do with the IRS is ignore them,” said Jackie Perlman, an analyst with the Tax Institute at H&R Block. “They don’t like to be ignored.”

According to the Associated Press, the Internal Revenue Service expects to receive more than 20 million tax returns this week. The agency had received about 102 million as of the end of last week.

With job losses mounting and the economy in shambles, the IRS has promised to be kinder and gentler to those who are struggling to pay their tax bills. The agency is offering to waive late penalties, negotiate new payment plans and postpone asset seizures for delinquent taxpayers who make a good-faith effort to settle their federal tax debts.

But agents will continue to impose big penalties on those who simply neglect to file an income tax return.

“We also have to be tough on those who flout the law and won’t pay what they owe,” said IRS Commissioner Doug Shulman. “The American people who play by the rules every day expect us to go after those taxpayers who don’t pay their taxes.”

Wayne Tucker, owner of Tucker’s Tax and Accounting in Woodville, Texas, serves clients all across Southeast Texas, including Tyler, Hardin, Jefferson and Orange Counties. He said it seems more people are waiting until the last minute to file their federal income tax returns.

“Some people always wait close to the deadline, and its usually people who owe back taxes, student loans, child support or business owners who haven’t planned as well,” Tucker said. “But it seems like more than ever are waiting this year and wanting to file an extension.”

Tucker said even people who will receive returns can file an extension if they are still unprepared, and, in some cases, depending on the how long it takes for the return to be filed, receive interest on their return. However, for those who will owe money to the IRS, Tucker suggests it is better to get the process started sooner rather than later.

“The better way for a lot of the people who know they will owe money to the IRS is to actually file their return early,” Tucker added. “They can file a Form 9465 for an installment agreement and begin making payments. It’s better to pay $50 or $100 a month than have penalties and late fees imposed on what you will owe anyway by not filing on time.”

Tucker said it is not uncommon for people to file an extension and wait until the end of the extension period before making payment arrangements, and it is largely because they don’t understand the process.

The volunteers with the AARP Tax-Aide program, which has been offering income tax filing assistance for senior citizens and low-income families since late January at the Orange Public Library, has also noticed an increase in people filing returns at the last minute.

“We always start out busy and hit a lull in the middle and pick up again at the end each year we do this program, but last Wednesday was our busiest day of the year so far,” said Dick Porter with the Orange AARP Tax-Aide program. “We never know what to expect on the last day, so (today) should be interesting,” Porter added. “We will work right up to the last minute, until the library closes today, helping as many people as we can.”

Here are some questions and answers for last-minute filers.

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Q: What if I don’t file a tax return by the April 15 deadline?

A: Taxpayers who don’t file returns or extensions by midnight on April 15 face penalties of 5 percent a month on any unpaid taxes, up to a maximum of 25 percent.

For taxpayers with small outstanding tax bills, there is a minimum penalty of $135, or 100 percent of the unpaid taxes, whichever is smaller. For example, if you owe $100 and don’t file a tax return, the penalty is $100. Plus, you still have to pay the taxes.

If you file a return but cannot pay all you owe, the penalty is just 0.5 percent of the unpaid taxes a month. That’s a tenth of the penalty for not filing.

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Q: What if I can’t afford to pay my tax bill?

A: Pay what you can and consider asking the IRS for a short-term extension or an installment agreement for the balance. Generally, taxpayers are eligible for installment agreements if their bill is less than $25,000 and they have paid their taxes on time in the past.

Taxpayers with installment agreements must still pay penalties on the unpaid balance, but they are reduced to 0.25 percent a month. Taxpayers can request an installment agreement using Form 9465. They can also request an agreement online at www.irs.gov.

Taxpayers can also use credit cards to pay their tax bills, but they should be careful because some credit cards have high interest rates and fees.

As the IRS says on its Web site, under the “If You Can’t Pay” heading: “Don’t panic. You have options.”

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Q: If I file for an extension, do I still have to pay any taxes owed by April 15?

A: Yes. Even if you file for an automatic six-month extension to file your tax return, you must still pay any taxes owed by April 15 to avoid penalties and interest.

The IRS estimates that 10 million taxpayers will file for extensions this year, up from 9.5 million a year ago.

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Q: Are there any tax advantages to filing for an extension?

A: The extension merely gives taxpayers more time to complete their returns.

However, this year, first-time homebuyers who plan to purchase a home before Dec. 1 might consider filing for an extension because they will be able to take a generous credit on their 2008 taxes.

Under the federal economic recovery package enacted in February, couples who buy a first home between Jan. 1 and Dec. 1 qualify for a tax credit of 10 percent of the purchase price, up to a maximum of $8,000. Couples making up to $170,000 a year qualify for at least a portion of the credit.

The credit can be taken on either a 2008 or 2009 tax return (sorry, you can’t take it on both). If you’ve already filed a 2008 return, you can file an amended return and get a refund, or you can claim the credit on your 2009 return.