With April 15th just days away, tax experts worry that consumers hit hard by this down economy may just ignore their tax responsibilities.
The precedent may have been set in the housing sector, where some home values are so "under water" that homeonbers simply mail the keys to the bank and walk away.
But the Internal Revenue Service warns that type of "strategic default" is not an option in the tax world.
"Say you've finished completing your tax return this year and you find that you owe money on it but you just can't pay it," says Sue Hales, spokesperson for the IRS, to Target 5. "The worst thing you can do is hold on to the tax return until later on. What you want to do is file your return timely, pay as much as you can with that tax return -- because that's going to help reduce penalties and interest you'll be charged -- and then request to pay the balance you owe in monthly installments."
"Doing nothing and ignoring the situation is what will aggravate the IRS the most," sayd Kamenski. "And for anybody that's dealt with an aggravated IRS-- the letters, the phone calls, the threats...it can get pretty nasty."
Here's why: ignore the tax deadline and you are sure to accrue penalties and interest charges. Ask for an automatic extension, which is guaranteed and extends for 6 months -- and the hit you take financially will be much smaller. Another reason to raise your hand and ask for help: there are payment plans available for a fee, to taxpayers who do not flaunt the April 15th deadline.
"There is a penalty for late filing a tax return and that penalty is 10 times greater than the penalty for just paying late," says Hale. "So it definitely pays to file on time, pay as much as you can, then request to pay the balance in monthly installments."
In a sign of these tough times, the IRS has posted a kinder, gentler section on its website titled "What If?" It's not exactly therapy for down-on-their-luck taxpayers, but it does hold your hand through some unpleasant scenarios like "What if I lose my home to foreclosure?" and "What if I am searching for a job."
Need more tips? Chicago's "Rockstar CPA" is offering its "4th Annual Rockstar CPA Extension Filing Marathon" and told Target 5:
- We're setting up in the public to file extensions for anyone that needs one--for free. Fast, instantly e-filed, and we don't retain contact info for sales purposes. We're just trying to help people avoid those unnecessary penalties and interest.
- People just need their names, addresses, social security numbers, birthdates, and email addresses (for confirmation purposes). It takes under 5 minutes.
- On Thursday April 14th from 10am to 10pm at Alliance Bakery, 1736 W Division St.
- On Friday April 15th from noon to midnight at Small Bar, 2049 W Division St.
- While not busy filing extensions, we will be answering questions again this year in the Craigslist "Tax Forum" for last minute self-preparers.