The Deadline is Coming! The Deadline is Coming!

The filing deadline for 2008 is April 15.  This is different from 2007 and 2006, when April 15 fell on a Saturday or Sunday, and there was a District of Columbia Emancipation Day holiday. But, this year, you MUST have your return filed by April 15. 

What happens if you don’t file by the deadline?  Well, that depends.  Let’s look at a few situations and their outcomes:

Jane doesn’t think she’ll owe any taxes, but she’s also not expecting a refund.  Jane decides it’s no big deal if she files her taxes when it’s more convenient.  Later in the year, before Jane has had a chance to file, the IRS sends a notice because they believe she owes taxes.  If she receives her letter before October, she’ll still be able to Efile, but if not, she’ll need to file a paper return.  AND, if she ends up owing taxes when she files, she’ll be paying the tax, plus interest and penalties.

Jill KNOWS she doesn’t owe taxes, but she expects a small refund.  Jill decides it’s not worth it to file.  When the IRS reviews her information (that’s right – the IRS does get income information on you from your employers), they determine that Jill is right – she doesn’t owe, but she should get a refund.  They don’t send any letters.  Four years later, Jill finally remembers about that small refund (she could use the little extra cash now).  But it’s too late – you can only file for a refund going back THREE YEARS.  Jill lost that money.  The really sad thing?  Jill wouldn’t have gotten just a small (say $50) refund.  If she’d gotten her taxes prepared, she would have received a $1,500 refund!

Jessica believes she owes the IRS a good chunk of change (in the range of $2,000).  Jessica also knows that she doesn’t HAVE $2,000.  So she decides to play Tax Roulette, doesn’t file her taxes and waits to see if the IRS catches up to her. See, she’s thinking that if they don’t catch it in three years (she heard about that three year rule), then she won’t have to pay.  WRONG!  While the IRS won’t send any refunds after three years, they can go back as far as they want to collect back taxes.  In the meantime, penalties and interest are piling up – not to mention the concern that the IRS may consider Jessica a tax evader.  That $2,000 could quickly turn into $4,000 or more.

In each of these scenarios, the taxpayer loses.  So what would have been the best solution?  In every case – FILE THOSE TAXES.  Let’s look again:

Jane would have realized that she owed a small amount of tax if she filed her return.  She could have paid that, made adjustments in her withholdings with her employer, and only been out a little bit of money.  And she could have set it up to either get a refund in the future, or at least not owe any tax.

Jill would have gotten that refund; plain and simple. 

Jessica would have definitely still owed taxes. It’s possible she would have owed less than what she thought.  Either way, she could have filed and sent in what she could afford.  The IRS would have worked with her to set up a repayment plan.  And, like Jane, she could have made adjustments in future withholdings with her employer that may have offset some of that tax liability. 

And if any of them had come to a PRO-TAX office, we could have made suggestions to reduce their tax liability – now and in the future.

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