survey by TechBargains.com found last-minute income-tax filers pay nearly double over those who file earlier in the year. That's better, however, than those who file late or don't file at all.
The IRS makes a significant distinction between taxpayers who fail to
file and those who fail to pay any outstanding tax debt. The penalty for
"Failure to File" is more
expensive, at 5 percent of the outstanding tax bill per month until the
return has been filed. Though this amount is capped at 25 percent, other
penalties like "Failure to
Pay" may come into play, charging an additional 1 percent of the
outstanding tax bill per month.
So what can you do to avoid these fees and headaches?
When Filing Electronically
There's a selection of cheap and easy online tax software, like TurboTax or those linked to on the IRS site.
Even if you owe money you can't pay, file now to avoid fees. Then contact the IRS to figure out a payment plan or fill out the
Installment Agreement Form for the outstanding debt.
When Filing By Mail
You can still file and pay on time, if your forms are postmarked with an
April 17 date, so hoof it down to the post office by the close of
business on Tuesday. Don't put
it off until too late, however, as the lines can be overwhelming.
When You Should File an Extension
If you have a complicated tax return or find yourself in a new financial
situation, consider filing an extension to give yourself extra time.
You don't want to miss any
available deductions, so it pays to take your time. File Form 4868 for a six-month extension. Outstanding tax debt is
still due April 15, however, so pay as much as you think you owe to avoid the Failure To Pay fee.
When You Need Payment Options
If you don't have funds to cover the entire outstanding debt, the IRS offers various payment options
and can work with you to set up a plan. You may qualify for a plan under
the recently launched Fresh Start Initiative, which offers an
installment agreement or a six-month
grace period depending on specific circumstances, including being
unemployed, going through bankruptcy, or owing over a certain amount.
WHAT TO DO WITH A REFUND
If you're one of the lucky Americans getting a refund this year, you can get the most from your money by following these tips.
Pay It Down
Pay off some or all of the debt on your high-interest credit cards. You
can also make an extra payment on the principal of your mortgage. Do
this just once a year and you
could save tens of thousands of dollars on the back end of your
Open an online savings account for better interest rates and a better
return on your money. The most popular online bank is ING Direct, but
there are several more that offer high interest rates.
Prepare For Emergencies
Lightning strikes all of us at one time or another, so it's wise to
establish a fund that will provide the necessary cash when emergencies
Spend It Wisely
If you're lusting after a big-ticket item, like a big-screen TV, use
your refund towards this purchase, rather than putting this expense on a
credit card or taking out a
loan. And don't just throw down your hard-earned cash without searching
for coupons first. If it's electronics you covet, you can find great
FreeShipping.org from TigerDirect and other online e-retailers.
Andrea Woroch is a nationally-recognized consumer and money-saving
expert who helps consumers live on less without radically changing their
lifestyles. From smart spending tips to personal finance advice, Andrea
transforms everyday consumers into savvy shoppers. She has been featured
among top news outlets such as Good Morning America, NBC's Today, MSNBC, New York Times, Kiplinger Personal Finance, CNNMoney and many more.
You can follow her on Twitter for daily savings advice and tips.