Did You Miss Form 1040's Filing Deadline?
Were you late with your taxes this year? That can prove costly. The law authorizes the Internal Revenue Service to impose hefty, nondeductible penalties if you submitted your 1040 form after the
How much is the penalty going to cost you? Generally, the late-filing penalty is 5% of the balance due (the amount on line 75 of the 1040 form) for each month that return is late, up to a maximum of 25%. The IRS calculates the penalty after subtracting taxes previously paid - most commonly, through withholding from your salary and your estimated payments.
And there's more. Another rule applies if your return is at least 60 days late. The late-filing penalty is at least $100 or the balance due with the return, whichever is the lesser figure. That means the IRS does not exact a late-filing penalty when there is no balance due.
And now the good news. There are times when the agency will forget about penalties for late filings or payments. To induce the tax collectors to undo an overdue-return penalty, you have to persuade them that there was "reasonable cause" for your tardiness.
So what cause is reasonable? The government's list of acceptable excuses includes a serious illness or death in your immediate family, postal delays, wrong advice from IRS employees, agency tardiness in providing tax forms and instructions, and the destruction of your home, photography studio or records as the result of a fire, other casualty or civil disturbance.
But what if you just don't have the money? The lack of sufficient cash to settle the tab at filing time, even if you are able to demonstrate that, is not reasonable cause that will relieve you of a penalty.
The IRS treats a 1040 form as filed on the date it is mailed to the IRS. That's more good news if you made it to the post office before midnight of April 17. Assuming there is no reasonable cause, you may qualify for relief under what is known as the "timely mailed, timely filed" rule. The agency will not
But expect no clemency for a return for 2005 that is mailed after April 17. Worse yet, a late mailing can turn out to be considerably more expensive than you might think if there is a delay of some sort in the mail delivery.
The IRS computes the late-filing penalty for a delinquent return from the date it is received, not the date mailed. The difference between a postmark of April 17 and April 18 can mean an extra 5% penalty if the return is delayed for as little as one extra day.
This was underscored in a dispute involving a return that was due on the usual April 15, but not mailed until May 14, just under a month late, and not received until May 19, a bit over one month late. The IRS said the penalty should be 10% rather than 5%, and the United States Tax Court agreed.
Julian Block, a former IRS agent and a tax attorney, is the author of "The Stock Photographer's Tax Guide 2006." For details on how to purchase this important 72-page publication: http://www.photosource.com/taxtips.php . For Julian's tax saving and tax planning reports, go to http://www.photosource.com/products and click on "2004 Tax Tip Guides." Julian can be reached at julianblock@yahoo.com .
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