Tax Tips
Surviving the crunch at tax time

By Howard Abrams, PBS Tax & Bookkeeping

I cannot file my taxes by April 18 (April 15 is a public holiday). What should I do?

You should file an Application for Automatic Extension of Time, Form 4868. An extension means that you are extending the filing of your income tax return until Oct. 17, 2016. By filing the extension application, you will eliminate a late filing penalty. However, it is not an extension of time to pay any taxes due.

Therefore, if you think you are going to owe money on your 2015 return, you should get it paid by April 18, 2016, so you can eliminate the late payment penalty. A general rule is to have paid at least 100 percent of the total tax from your 2014 tax return to eliminate or reduce underpayment penalties. An extension is valid even though the estimated balance due is not paid.

If you're in a refund situation and you file an extension, there will not be any underpayment penalties. If

you owe taxes and pay the balance when you file your tax return after April 18, even though you have a valid extension you can bet the IRS will hit you with late payment penalties, but not the late filing penalty.

My tax return is finished, but I don't have the money to pay for it. What can I do?

File the return on time without payment or file for an extension to avoid the late filing penalty of 5 percent per month up to 25 percent.

If you think you can make the payment within a few months of filing, pay as much as possible with the return or extension. Mail the balance when you receive the IRS notice of tax due. The sooner you are paid in full the more you save in penalties. Paying by credit card is another option; however, a percentage of the payment is charged as a convenience fee plus interest at the credit card rate. This can be costly.

If you owe $25,000 or less, attach Form 9465 to your tax return in order to set up a payment plan. You can also arrange a payment plan online. Use the IRS online Payment Agreement Application.

If you owe more than $25,000 up to $50,000, you must attach Form 433-F if you do not agree to make your payments by electronic funds transfer. Form 433-F Collection Information Statement asks for personal and business financial information. Any taxpayer who has an installment agreement for a prior year cannot file form 9465. In that case, they will have to negotiate with the IRS.

I had problems paying the balance due on my income tax return. What can I do so I don't have the same problem in the future?

A You should pay Quarterly Estimated Income Taxes. When you received your income tax return it should have included estimated tax vouchers for the coming year. If you do not pay those, not only may you owe income tax but your balance due will include penalties. The purposes of the vouchers are follows:

  • Enables you to prepay in potential taxes on your next year's income tax return.
  • Can eliminate underpayment penalties.
  • Help eliminate the burden of having to come up with a large tax payment due on your income taxes.
  • If you have trouble paying the vouchers during the year, or if you have an abundance of cash in your checking account, you need to do an analysis to find out why.

I heard the penalties for not having health care coverage are increasing. What are my obligations?

Under the Affordable Care Act, you and your family must have qualified health insurance or qualify for a health coverage exemption. If not, you will pay an Individual Shared Payment (penalty) when filing your federal income tax return.

Your health coverage must cover the whole year. For any months you or your family did not have coverage, you will pay a penalty. Use Form 8965 to claim an exemption from coverage if you qualify. LL

This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. Visit our website at www.pbstax.com.

Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.