Dollars & Sense

Tax Time - What You Need to Know

IF YOU CANNOT PAY TAX DUE

Filing: File the return on time or file for an extension to avoid late filing penalty of 5% per month up to 25%.
Pay late: If payment can be made within a few months of filing, pay as much as possible with return or extension. Mail balance with the IRS notice of tax due.
Pay by Credit Card: Cost: Percentage of tax as a convenience fee plus interest at the credit card rate. This can be costly.
Installment Agreement: If you file your income tax return on time and owe not more than $25,000, you can get an installment agreement by filing Form 9465, “Installment Agreement Request”, with your tax return in order to set up a payment plan.

The IRS will usually accept installment agreements on Form 9465 from taxpayers if the unpaid liability is $25,000 or less and the tax will be paid within five years. A $43 user fee will be deducted from the first payment. Late payment penalties and interest will be charged on the unpaid balance. Interest is charged at the federal interest rate, which was 8% the last quarter of 2006. In addition you have the late-payment penalty of ¼ of 1% a month or 3% per year.


ABATEMENT OF PENALTIES AND INTEREST

Late payment penalties can be abated only if you can show reasonable cause.

Reasonable cause for late filing includes:
. Death or serious illness of the taxpayer or immediate family member.
. Unavoidable absence of the taxpayer on the filing date.
. Destruction of the taxpayer’s residence or business.

Submit a written request to the Director of your IRS center. You must include a signed declaration saying “Under penalties of perjury, I declare that I have examined this statement and accompanying information and, to the best of my knowledge and belief, they are true, correct and complete.”



FILING AN EXTENSION

If your tax return is not going to be done by April 15, you need to file an “Application for Automatic Extension of Time”, Form 4868.

The Federal tax return deadline for the 2007 tax year is Tuesday, April 15, 2008.

An extension means that you are extending the filing of your income tax return until October 15, 2008. 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 2007 return, it is a good idea to get it paid by April 15, 2008 so you can eliminate a late payment penalty. Your tax preparer can help you estimate the amount of tax due, even if there is not enough time to get your return done. 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 Form 4868. The IRS can invalidate an extension if tax is understated. An extension application is valid even if the estimated balance due is not paid with the application.


TAX TIP

Economic Stimulus Package
Legislation passed approving tax rebates for millions of qualified Americans. To receive the rebate you must file a 2007 tax return. The tax rebate provides up to $600 for individuals and $1,200 for couples. Families meeting the income requirements could receive an additional $300 per child under age 17. The tax rebates are part of the government plan to stimulate the economy through a boost in spending. If you normally would not be required to file a 2007 tax return you should file one anyway. By filing you establish your eligibility to receive the tax rebate. If you file your tax return by April 15 you can anticipate receiving your rebate check as early as May or June. Taxpayers who file after April 15 can expect a delay in receiving their rebate checks.


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.”