Dealing with Tax Filing and Payment Problems

Tax season is just around the corner. Few people look forward to it, but those who are concerned they may owe taxes approach this time with particular apprehension. The California Society of CPAs ( advises that there are options for those who need more time to file their returns or who are having trouble paying what they owe.

Getting an Extension

If you don’t have the information you need to file by the tax deadline, or will be delayed for some other reason, it’s possible to receive an automatic six-month extension for filing your return. That means that you will have until October to get your documentation to the Internal Revenue Service (IRS). However, the IRS will still want you to pay the taxes you owe by the April 15 deadline, even if you receive the filing extension.

In other words, although you are not required to make a payment of the tax you estimate as due, filing the appropriate forms for an extension does not extend the time to pay taxes. If you do not pay the amount due by the regular due date, you will owe interest and may be subject to penalties. Your CPA can help you determine whether an extension is a good step for you and what payment amount you may owe in the meantime.

Don’t Fail to Pay

What happens if you just can’t pay the taxes you owe? The IRS may be willing to work with you in this situation, so it’s important to get in touch with them and discuss your options. Your CPA can explain the choices to you and work with you and the IRS to resolve the problem. Be aware that failure to file a return at all will, at a minimum, subject you to penalties, so this is never your best course of action.

Your Payment Options

If you just need a little more time to pay, you can ask the IRS for up to 120 extra days through an Online Payment Agreement available on the IRS site, You generally don’t have to pay a fee for this arrangement, although you will owe penalties and interest for the late payment.

If you need an extended time to catch up, then you may need an installment agreement. Under the agreement, you make monthly payments of a minimum of $25. Any future refunds for which you qualify will be used to pay off the outstanding debt. There are fees associated with an installment agreement that vary based on your income level and how the fees are paid.

You can avoid the fee if you are able to pay your total outstanding taxes within 120 days. You will still be expected to file your tax returns on time and pay all future taxes in full and on time. The IRS generally doesn’t take enforcement collection actions if you are applying for an installment agreement or have one.

Get a Fresh Start

The IRS’s expanded “Fresh Start” initiative is aimed at people who have lost their jobs and are having trouble paying their taxes as a result. The program offers a grace period on penalties for some taxpayers who have been unemployed 30 consecutive days or longer.

Self-employed people whose business income fell 25 percent or more in 2011 also may qualify. In addition, the IRS has recently begun offering more flexible terms to its Offer in Compromise program, with new penalty relief, a widened pool of people eligible to use streamlined installment agreements to pay back taxes and changed lien practices. Ask your CPA for more details if you believe you may qualify.

Your CPA Can Help

If you are facing challenges in filing your tax return or paying your taxes due, be sure to turn to your local CPA. He or she can offer advice on all your pressing financial questions.

Copyright 2013 American Institute of Certified Public Accountants.

The Money Management columns are a joint effort of the AICPA and the California Society of CPAs as part of the profession’s nationwide 360 Degrees of Financial Literacy program.