If You Owe the Gov’t Money on Your Income Tax

Most Americans get tax refunds, but if you do not, and you have a balance due at the end of your tax return, please be aware of the following; many Americans believe that as 15 APR approaches, they can file an extension and pay their balance due at a later date. THAT IS NOT TRUE. There is no extension of time for paying the government what you owe them. EVERYONE who owes the government money from their income tax return is required to pay that money on 15 APR. After that, penalties and interest are added to the bill. You may ask; well then, what does an extension do? An extension is an extension of time to file your tax return. That is all. You still owe the money on 15 APR. So you may ask; how do I know how much to pay them? return4refund The only accurate way to determine the answer to that question is to complete your tax return. Let’s say there is some piece of information that you are lacking and that is why you cannot complete your tax return. In that case, if you really know that you owe the government money, then you have little recourse but to estimate the amount you owe, add a little extra for cushion and send a check for that amount to the U.S. Treasury Department.

Now this is not trivial. If you are in this situation and you have to send a payment to the U.S. Treasury Department, be sure to do the following:

Acquire the correct physical address by going to the official IRS website and then
In the little search window in the upper right-hand corner of the home window type in “mailing address” then click on the “Search” button just to the right of that little window and then
click on the “Where to File Paper Tax Returns With or Without a Payment” link and then
Click on your state in the list and then
Use the address in the row for form “1040-V”.
Make the check out to “U.S. Treasury Department” or “Internal Revenue Service” or “IRS” but the government prefers that you make your checks out to “U.S. Treasury Department”.
On the check memo line (you know what that is – the little line in the lower left hand corner of your checks) write two things:
Your Social Security Number (SSN) and
The words “2015 1040” to tell them you are paying your 2015 balance due.
By following the three steps above, the IRS will know whose account to credit the payment to and what payment you are making.

Now here comes the tricky part. Let’s say that you are still missing that piece of information and cannot yet file your tax return. But you are unsure if you really are going to owe the government or not. Let’s say that the current tax year is not very much different from the last tax year; you (and your spouse, if applicable) made about the same amount of money, you are claiming the same number of exemptions, your mortgage interest (if applicable) is about the same, you did not change your Form W-4 at your employer so your paycheck withholding is about the same, there were no radical changes in your life for the year (like significant medical expenses or a large casualty loss or a large capital gain, etc., etc.) AND you received a healthy ($500 to $1,000 or more) refund last year.

In that situation, it is unlikely that you will owe the government any money, you will probably receive a refund like you did the previous year and 15 APR really means nothing to you. The only date that means anything to you in this situation is three years from the due date of the return (including extensions); after that point in time, the IRS will no longer refund your money. So you really do not have to scramble to get your tax return done by tax day, you can wait a month or two until you receive that final piece of missing information and then file your tax return. Not only will you receive your full refund, but the government will pay you a small amount of interest for the time since tax day that they held your refund until the time they either directly deposited your refund in your bank account or mailed you a check. There is no penalty for failure to file if you are due a refund.

But the reality of life is that whatever piece of information you are waiting for to complete your tax return probably has a large impact on the answer to the question of if you owe the government money or not. Even if it does not, if you are reasonably certain that you will have a balance due on your tax return, then you have no choice but to file the extension and send them some money. And you have to estimate that amount of money to send them the best way you know how.

Herein lies the subtle difference; if you are getting a refund, and you file your tax return after the tax day due date, the government does not care. You transmit or send in your late-filed tax return, the IRS processes your tax return and either directly deposits your refund or mails you a check, end of story. But if you OWE money, and you send them a check for what you think you will owe them and you do NOT file an extension, then there will be penalties and interest because you failed to provide a timely-filed tax return.

The simple lesson here; you need an extension only if you are sure you owe the government money on your income tax return and for whatever reason, you cannot file your return by the tax due date.

If you need help completing your current or late-filed or past-year tax return, please send an email note to your.tax.professional@gmail.com and I will respond to you. I can also help you find out what was reported to the IRS under your SSN for a previous tax year.

My name is Eric Jahnsen and I am an Enrolled Agent which means I am enrolled to practice before the IRS. For your tax preparation needs, acquiring your prior year reported information or just related help and suggestions, send an email to your.tax.professional@gmail.com.

 

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