The Home Stretch – our final set of reminders for 2010 returns
Finally, the end of tax season 2010 is in sight. It’s the end of gathering and sorting through mountains of paperwork looking for tax forms and tax deductions. And just in time for spring, many clients are leaving the office with visible signs of relief knowing they are done with tax filings. But if you have not yet filed your taxes, there are a few due dates and payment arrangements you could find helpful.
The returns are due Monday, April 18th this year because the 15th falls on Emancipation Day, a Washington, D.C. holiday. If you need more time, you can file 4868 with the IRS by the due date and add a check for any additional tax you expect to owe. You can also e-file the form 4868, and for a fee, charge an extension tax payment on your credit card through an IRS-approved processor (Better Financial Solutions, LLC is an approved filer). An extension will allow you until October 17, 2011 to file the 2010 tax return.
But be careful not to short-change your estimate. If it is unreasonably low, the IRS can void the extension!
If you can’t pay when filing your return or an extension for the return, file anyway. Filing avoids the 5% per month failure to file penalty. The failure to file penalty is capped at 25% of the unpaid balance. The failure to pay penalty is much less, .25% per month. You can arrange for installment payments by filing Form 9465. There is a fee of $105 ($52 if you agree to wire payments) which you can add to the bill and have it deducted from the monthly payments.
Finally, don’t forget to fine-tune your estimated tax payments and withholding for 2011 if you owed a lot of tax for 2010 or you expect to owe a lot for 2011. If you are a wage earner (don’t work for yourself as a sole owner or partner), you can wait until the end of the year and have the additional income tax withheld from a December payroll or IRA payout. The IRS considers withheld tax as being paid evenly over the year unlike estimated tax payments. You needn’t prepay all the tax you might owe for 2011, just an amount equal to 90% of it, or 100% of your 2010 tax bill (110% if your Adjusted Gross Income exceeded $150,000 in 2010). This will avoid the underpayment penalty, even if you end up owing the IRS a lot of tax.
Hope this is helpful as we end tax season and welcome Spring!
