Taxpayers Short on Funds at Tax-Filing Time Should Not Delay Filing Return

February 15, 2002

Many taxpayers who are short on funds when their taxes are due tend to delay filing their tax return. This, of course, is unwise. There is a failure-to-file penalty (5% per month of the balance due for up to five months) that is applied to taxpayers who miss a filing date without a proper extension for filing their return.

Note: A taxpayer can put off filing a return — and avoid the failure-to-file penalty — by getting an extension to file (up to four months) by filing Form 4868.

If a taxpayer doesn’t have the funds to pay the tax due at the time of filing (either the return itself or the extension request), he or she should still file on or before the due date and pay as much as possible to keep down the interest payments and to show good faith.

Note: In addition to the failure-to-file penalty, there is also a penalty for failure to pay tax on time. This penalty doesn’t apply during the four-month extension period of Form 4868, if at least 90% of the tax due is paid by the return due date, through withholdings, estimated tax or with the Form 4868.

TIP: If you have not filed a tax return for a previous year, call us. Your problem may not be as great as you think. It is normal for most people to lose sleep over such things. Maybe we can help put your mind at ease.

Where a taxpayer cannot, in good faith, pay the tax, IRS will generally work out a payment schedule after it has reviewed the taxpayer’s financial condition.