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Last-minute filing tips

Published: April 15, 2011 7:18 AM
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This year, the federal income tax filing deadline for most taxpayers is Monday, April 18th. That's due to observance of a holiday in Washington, D.C. on April 15th. Since District holidays affect federal tax deadlines the same way federal holidays do, taxpayers nationwide have an extra three days to prepare and file their 2010 federal income tax returns.

Those who needed more than three extra days to file can get an automatic six month filing extension from the IRS. Form 4868, the request for an extension, can be filed by paper or electronically (e-file).

The extension permits taxpayers until October 17, 2011, to file their return, without incurring a failure to file penalty.

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Although the extension provides extra time to get paperwork to the IRS, it does not extend the timeline on payment of tax due. Interest will be owed on any amount not paid by the April 18th deadline, and some other penalties may also be assessed.

So, taxpayers should try to file on time even if they're unable pay everything owed as of April 18th. If the return is file-ready, send it in and pay as much as possible, to minimize the amount of interest and penalties for late payment. The IRS will send a bill or notice for balance due.

Taxpayers who request an extension by e-file can choose to pay any expected balance due by authorizing an electronic funds withdrawal from their checking or savings account.

If unable to pay the full amount, taxpayers should immediately call the number or write to the address on the bill they receive. The IRS will work to help " based on the circumstances, options can include an extension of time to pay, an installment agreement, temporary delay or an Offer in Compromise.

The extension of time to pay may be up to 120 days, to pay in full. No fee is charged for this type of payment arrangement and this option may minimize the amount of penalties and interest incurred.

An installment agreement arrangement allows for monthly payments after a one-time fee of $105 is paid. Taxpayers who choose to pay through a Direct Debit from your bank account have their fee reduced to $52. Lower-income taxpayers may qualify for a reduced fee of $43. To apply for an installment agreement, either use the Online Payment Agreement application available on the IRS website, or file a Form 9465, Installment Agreement Request, or call the IRS at the telephone number shown on the bill.

In some cases, a taxpayer may qualify for an Offer in Compromise, an agreement between the taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

Another option to consider for someone who owes but is unable to pay their tax bill in full is to finance the full payment of the tax liability through a loan. The interest rate and fees charged by a bank or credit card company are usually lower than interest and penalties imposed by the Internal Revenue Code.

Last but not least, it is important to respond to an IRS notice. If you do not pay your tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action.

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