Jewish World Review April 18, 2001 / 25 Nissan, 5761
http://www.jewishworldreview.com -- Oops. You woke up yesterday morning and realized you had forgotten something - something important:
Filing your federal income tax return.
If you are one of the estimated 75 percent of taxpayers who have a refund coming, relax.
The Internal Revenue Service doesn't penalize those who file late returns unless the taxpayer owes the government money. Those who have refunds coming can wait up to three years before filing and reclaiming the money - something many taxpayers are unaware of.
"I didn't know that," said Shayla Hopkins, a busy Pittsburgh student who rushed to file her tax return by Monday's deadline. "They always tell you to hurry, hurry, hurry."
And, yes, IRS officials and tax experts alike say procrastination is dangerous and unprofitable.
For those owed refunds, "there will not be a financial penalty and the IRS will not aggressively pursue you," said William Cressman, an IRS spokesman in Philadelphia. IRS agents will not beseech taxpayers to take their refunds; no threats to credit paychecks will be made.
"But the bottom line is, you're hurting yourself," Cressman said.
Besides allowing the IRS to serve as an interest-free bank, there are risks in waiting. There's always a chance that the taxpayer may be wrong and actually owe money, and even a small debt to the IRS can balloon.
Those who fail to pay taxes on time and owe the IRS may be forced to pay a "failure-to-file" and "failure-to-pay" penalty plus interest, both based on amounts owed. The interest rate for failing to pay is 5 percent a month, compounded daily, to a maximum of 25 percent a year.
It is also more convenient to file tax returns before the deadline. Afterward, there are no volunteers to help with filing, and finding tax forms is more difficult.
Nationally, about 8 percent of all taxpayers receive extensions permitting late filing and another 7 percent fail to file by the due date, said James Jenkins, founder of Tax Research Services. Of those who fail to file by the deadline, 95 percent are men, said Jenkins. Of them, half have undergone a divorce in the last year, he said.
Taxpayers who cannot afford to pay because of credit card debt or other financial problems should make the IRS their top priority, Jenkins said.
"The IRS is a very strong, impersonal, uncaring organization," he said. "You do not want to be involved in any dispute with them."
The IRS can charge taxpayers who fail to pay with tax evasion or fraud. The government can file liens that lay claim to property and harm credit ratings. The government can take and sell property to pay for taxes. And when you don't file, the IRS determines the amount owed.
"The IRS will not give you credit for various deductions or extra credits you'd be entitled to but didn't tell us about," said Cressman.
In short, next year it'll be smarter to file
Antonio Gilb writes for the Pittsburgh Post-Gazette. Comment by clicking here.