Tax Briefs

April 15, 2007

How to file for an extension

File Form 4868 before April 17 for an automatic six-month extension for time to file.

Money owed still is due April 17. A ballpark amount the taxpayer believes is owed should be sent to the IRS regardless of whether paperwork is needed to complete the return.

A filer will be reimbursed for any amount paid in excess of the amount owed or will be charged an additional expense if the ballpark figure is less than the amount owed, said Jim Dupree, an IRS spokesman.

Penalties will be imposed for late payment, Dupree said.

Interest and penalties add up on unpaid taxes

What happens if the filer does not pay the taxes owed?

Penalties will be imposed if money owed is not sent to the IRS on time.

Interest compounded daily is charged on any unpaid tax from the due date of the return until the time of payment, said Jim Dupree, an IRS spokesman.


"In addition, if you filed on time, but didn't pay on time, you'll generally have to pay a late payment penalty of one-half of 1 percent of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent," Dupree wrote in an e-mail.

Dupree said the taxpayer would not have to pay the penalty if he or she could show reasonable cause for the failure to pay.

And the one-half of 1 percent rate increases to 1 percent "if the tax remains unpaid after several bills have been sent to the taxpayer and the IRS issues a notice of intent to levy," Dupree said in the e-mail.

Those paying their taxes under an installment agreement face a penalty of one-quarter of 1 percent for each month, or part of a month, that the installment agreement is in effect.

Penalties could apply if you don't file on time

What happens if you do not file on time?

If you did not file on time and owe tax, you might owe an additional penalty for failure to file unless you can show reasonable cause.

The combined penalty is 5 percent - 4.5 percent late filing and 0.5 percent late payment - for each month, or part of a month, that your return was late, up to 25 percent, Dupree said.

The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return, Dupree said.

After five months, if you still have not paid, the 0.5 percent failure-to-pay penalty continues to run, up to 25 percent, until the tax is paid. Thus, the total penalty for failure to file and pay can be 47.5 percent - 22.5 percent late filing, 25 percent late payment - of the tax owed, Dupree said.

If a return is more than 60 days late, the minimum failure-to-file penalty is the smaller of $100 or 100 percent of the tax required to be shown on the return.

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