Time's up! It's tax deadline day and the IRS wants your money

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You've put off filing for 3 1/2 months, but any more procrastination could cost you. So don't just sit there.

Actually ... do sit there just a bit longer. Stick with Bankrate, and we'll walk you through what you have to do today to get the IRS what it wants.

Don't ignore the IRS

The key to surviving last-minute tax filing is realizing the IRS will not be ignored. The federal tax collector has a penalty system to make you pay more if you don't pay on time.

You can suffer severe penalties if you don't file or pay taxes on time:

  • Not filing your return will cost you an additional 5% each month of any due tax.
  • Not paying what you owe will add an extra charge of 0.5% each month of your due tax amount to your overall IRS debt.
  • If you don't file or pay for 5 months, the 0.5% failure-to-pay penalty will accrue, up to 25% of what you owe, until the tax is paid.
  • In that case, the total penalty for failure to file and pay could amount to 47.5% of your tax bill.
  • If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $205 or 100% of the unpaid tax.
  • Interest also is charged on the overdue amount.

If you end up facing both non- or late-filing penalties for a substantial amount of time, you could end up owing a whopping 47.5% (22.5% for late filing, 25% for late payment) of any tax you owe.

Interest charges also will continue to add up -- on the penalties, too. So let's get started and get your taxes done!

Hardship relief

The IRS is not completely heartless. It offers some penalty relief to taxpayers who will face an undue hardship if they pay their tax bills by the deadline. This relief applies to income taxes, as well as to self-employment taxes.

An undue hardship is more than a financial inconvenience. You must send the IRS supporting documentation that shows you will have a substantial monetary loss, such as selling property at a much lower price than you could get under ideal circumstances, if you pay your tax on time.

In these cases, the IRS will waive the late-payment penalty if the eligible taxpayers pay tax and interest due by Oct. 15. However, interest on the due tax will continue to accrue. To apply for penalty abatement, file Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship.

Another shot at postponement

Since you've waited this long, you might be inclined to put off the inevitable a bit longer. Guess what? You can -- sort of.

The IRS will wait for your return until Oct. 15 (Oct. 17 this year, since the 15 lands on Saturday) if you file for an automatic extension. You can do this by sending in Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You can e-file the extension request from your home computer or have your tax professional who is an IRS-authorized e-filer do so for you. Regardless of which method you choose, the extension request also must be made by today, or postmarked today if you snail mail it.

The extension will give you 6 more months to get your tax act together. But you don't have to wait until that ultimate deadline. Anytime you get your tax-filing material in order before then, you can send in your 1040.

Pay anyway

Filing this form won't delay any money you owe Uncle Sam. While he'll wait patiently for your paperwork if you ask, he wants the money on its way today -- or all those interest and late-payment fees will be tacked on to your final bill.

How do you know how much to send? You don't have to be precise. As long as the amount comes to 90% of what you eventually owe when you crunch all the numbers, you'll be OK with the IRS.

The easiest way to estimate the amount to pay is to look over last year's tax return. If your financial and tax situation are basically the same as last year -- you have the same job, still married, 2 kids, deductible mortgage interest -- then what you owe this year is likely to be close to the amount you owed last year.

Choosing your form

By now, you may have decided that it's just as easy to file and be done with it. In that case, your first step is to pick which form to use. The IRS gives you 3 options: the 1040EZ, the 1040A and the long 1040.

If your tax life is very simple, Form 1040EZ may be best for you. If you have a few items other than just your salary -- say, a student loan you've been paying interest on or an IRA contribution -- look over the 1040A. And if you have income from several different sources or plan to itemize deductions, then it's the long Form 1040 for you.

If Form 1040A or 1040 works best for you, then you're probably going to have some added tax paperwork to complete, such as Schedule A if you itemize deductions or a variety of worksheets or forms if you claim some credits. Once you determine the extra forms you'll need, you can download them from the IRS website.

Gathering the data

Next, track down all your income documents -- W-2 salary, wage statements, reports on how much interest you earned last year.

Don't have them all? Get in touch with your boss and the other statement issuers, and request copies now. If you have to wait for the duplicates, though, make sure you file an extension application.

If you're really committed to getting your taxes done today, there's a way you can file without the forms. For interest and dividend income, pull out your last account statements. They should have the earnings information you need.

As for your missing W-2, use the data on your final pay stub from last year to complete Form 4852, the IRS' authorized income statement substitute. Then, fill out Form 4852 in place of the absent W-2.

Filling in the blanks

Now it's time to fill in the form blanks.

The key here is making sure you don't miss any tax deductions or credits that can save you some tax dollars (hint: credits are usually better since they reduce your tax bill dollar for dollar).

The bulk of the tax breaks, such as home-related deductions, go to itemizers. But most filers actually claim the standard deduction, and there are some write-offs, such as more than a dozen above-the-line deductions, that are available to every taxpayer, regardless of which deduction method they use.

If you think you might be able to claim some deductions or tax credits but are having trouble finding all those receipts to substantiate your claim, consider filing that extension request so you'll have a few more months to sort through the stack of tax documents in the corner.

The home stretch

Oh, wait! You just found the receipt you needed, so it's time to wrap up this process.

You've completed the forms, attached the required statements, made out the check, affixed your signature and sealed the envelope. Now it's time to get that tax material on its way to the IRS.

If you've done your taxes the old-fashioned paper way, head for the post office. But make sure it's a quick trip. Use the U.S. Postal Service's office locator to find the one nearest you. If it's getting late, call first to make sure the office will be open longer to collect tax returns.

Or you could dispense with paper altogether. You can download several tax software packages and use them to file electronically directly from your personal computer. If you don't want to clutter up your computer's hard drive, you can access essentially the same products online to complete your taxes via the Web. The IRS encourages this method via the Free File Alliance, which affords some taxpayers no-cost online tax prep and filing.

Of course, there's still time to take the rest of the day off and file Form 4868. It's usually better to file an extension than to send in a return riddled with mistakes.

Mission accomplished

Congratulations, you did it!

What exactly you did doesn't matter at this point as long as you send the IRS something. If you completed your taxes, take a well-deserved break.

And if it's an extension request that's on its way to Uncle Sam, we'll see you back here at in October!


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