The final October 15th personal tax filing deadline is hours away. Yet, the federal government is still shut down. Is the IRS giving us extra time? Heck no! The e-filing system is working just fine. But don’t try to get an answer to any of your questions from the IRS. Their offices and phone lines are closed. You have until midnight in your time zone to e-file or postmark your tax return.
So, what’s a poor taxpayer to do?
Uh, no. Look to other places for tax answers. Here are places to find reliable, free answers:Scan, search or read the IRS Publications; Intuit’s Tax Community; H&R Block’s Tax Answers; About.com’s Tax Forum; AARP’s Tax Aide ; My TaxQuips Forum.
If your question or problem is too complicated for free help, you have two choices:
1) Run to a good, local tax professional and see if you can find someone willing to prepare your tax return at the last minute.
2) Or, since a pro may not be available, file your tax return with the best information you have possible at this moment.
Filing a not-so-complete tax return
Believe it or not, there is some give in the tax system. The IRS knows that you don’t always have all the information you need to file a complete, perfect, tax return. That’s why we have the right to file amended returns.
First step: Gather all the information you do have, and information that you’re sure is complete.
Step two: Make a list of all the things you are missing. You may need two lists – one list of things that you have on your tax return every year; the other for unusual or complicated issues.
Step three: When it comes to the routine things, like vehicle registration fees, medical expenses, normal business expenses, etc. – make reasonable estimates based on prior years’ numbers. Include a statement with the tax return that lists each schedule where you made these kinds of estimates, and how you made the calculations.
Note: Do not estimate charitable contributions of over $250. The U.S. Internal Revenue Code is very specific about the fact that you need receipts for your contributions before you file the tax return. The Tax Court routinely disallows real, substantiated contributions of $10,000 or more – simply because the receipts were provided late.
Step four: Dealing with more complex matters, like these: You may be missing a K-1; or you cannot figure out your basis in stock you sold; you received a cancellation of debt notice and have no idea how to report it; you abandoned property, or lost your home; your company provided health care coverage for your partner, but the IRS wants to tax it – and you don’t know how to deal with that, when the state allows it; you started a business last year and don’t really know how or where to report it; you got a K-1 and no matter how you run the numbers, you end up with a big chunk of phantom income; you have a dependent who doesn’t have a Social Security number or an ITIN (for aliens); you were an employee, but received a 1099 and don’t want to pay the extra taxes.
Many of those are common issues to tax professionals. Those who still have time before the deadline will be happy to help you resolve your problems. But if you have critical missing information, or you must prepare the tax return yourself, here’s what to do. For each such issue, spell out on paper what the problem is. Then, proceed to explain how you arrived at the number you are using in the tax return. You may need to show your math. You may also need to get printouts of valuations from the Internet. When possible, provide other, objective, third-party data that you can find online about the way someone else handled something similar.
Whatever you do, be sure to provide enough information about the problem or issue so that the IRS can understand and/or research the information. That may mean locations of properties, dates of purchase and/or sale. As many numbers as you have. Perhaps information about lenders, copies of 1099-A or 1099-C, copies of K-1s, etc. You’re writing information and explanations on paper. You are not limited to the few lines or fields in a software program. So, write as much as you need to clarify the issues. You do want to give the IRS enough information to conduct an audit. By giving the IRS enough information so that they can initiate an audit, you are limiting their time to audit to three years. Incomplete information will leave you vulnerable for six years.
Filing your incomplete tax returns
The best way to stay out of trouble when you don’t have all the information, or all the answers, or even, when you simply don’t know how to treat something, is to file your tax return on paper.
That means, right now, you need to find out what the latest mailing deadline is at the U.S. Postal System in your area. While some Post Offices close at 5:00 or 5:30, you might find a regional facility that will accept and postmark your mail until midnight. You may also use certain specific DHL, FedEx or UPS services. Read the IRS details about which of their services are acceptable. Again, make sure you learn the time of their last pickup for the day.
File, file, file
Regardless of how complete or incomplete your final result, whether you have the money to pay the taxes or not, file your tax return on time.
By filing on time, you avoid the 5% per month late filing penalty. Your late payment penalty is limited to 0.5% per month, instead of 5% per month. You won’t have to pay interest on all those penalties, either. And you now have three years to gather the correct data to amend your tax return.
As to being short of funds, you can generally set up an installment agreement with the IRS. That’s much easier to do if you don’t have a late-filed tax return. You’ll owe less, too. So you’ll be able to pay it off sooner.
Being aware of the problems you faced for 2012, take a quick look at your 2013 tax situation. If you have issues or questions about 2013, next week is a good time to start resolving those issues for this year. You don’t want to be in this same spot next October 15th.
Eva Rosenberg, EA is the publisher of TaxMama.com
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