Dollars & Sense

Tax Time is Coming to a Close

Estimated income taxes

April 16 is not only the due date for filing your 2006 tax return, but also the due date of your first estimated tax payment for 2007 taxes.  Many truckers who do not pay their estimated income taxes on a quarterly basis and prefer to wait until the end of the year are often surprised to find out that they have been charged penalties by the IRS. 

The point here is that the IRS wants to get their money on a timely basis throughout the year and so they have set up a method of paying estimated taxes four times a year.  The due dates are April 16, June 15, September 15, and January 16, 2008.

If you can't file on time, get an extension

If your tax return is not going to be filed by April 16, you may choose to 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 October 15, 2007.  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 2006 return, it is a good idea to get it paid by April 16, 2007, so you can eliminate a late payment penalty.  You will have to estimate the amount of tax due.  The IRS can invalidate an extension if tax is understated.  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.  A reasonable estimate of tax liability must be entered on the Form 4868.  If you owe taxes and pay the balance when you file your tax return after April 16 even though you have a valid extension, you can bet the IRS will hit you with late payment penalties.  They have stepped up this procedure.

IRS tax tip
If you change your home or business address, notify the IRS to ensure that you receive any refunds or correspondence.  While the IRS uses the Postal Service’s change of address files to update taxpayer addresses, notifying the IRS directly is still a good idea.

There are several ways to do this.

•On your tax return.  You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file.

•Form 8822.  You may use Form 8822, Change of Address, to submit an address or name change at any time during the year.

•Verbal Notification.  If an IRS employee contacts you about your account, you may verbally provide a change of address.

•Written Notification.  To give written notification, write to the IRS center where you file your return and provide your new address.  The addresses for the IRS centers are listed in the tax instructions.

In order to process an address change, the IRS will need your full name, old and new addresses, and your social security number or employer identification number, and signatures.  If you filed a joint return, you should provide the same information for both spouses.  If you filed a joint return and have since established separate residences, you should each notify the IRS of your new addresses.

It’s a good idea to notify current and past employers of new addresses so that you can get your wage statements on time.

If you change your address after filing your return, don’t forget to notify the post office at your old address so your mail can be forwarded.

You should also notify the IRS if you make estimated tax payments and you change your address during the year.  You should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return.  You can continue to use your old pre-printed payment vouchers until the IRS sends you new ones.  However, do not correct the address on the old voucher.

You can download Form 8822, Change of Address, at the IRS Web site, www.irs.gov or order by calling 1-800-TAX-FORM (1-800-829-3676).

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. Contributions to this article were made by Shasta May, Director Business Development for PBS.  If you would like further information, please contact us at 800-697-5153.  Visit our Web Site 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.