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To File or Not to File

File your tax returns. A week from now will be too late. It can be cumbersome, stressful and certainly annoying. But it’s one of those things in life. Do it and be done with it. Some added incentives to filing:

A. Avoid costly consequences
Did you know the IRS late-filing penalty is 5% of any unpaid tax due per month after the return’s due date? The same penalties apply to failing to file altogether. And failing to pay risks a penalty of ½ to 1% of any unpaid tax due per month. And the penalties are calculated separately from interest, which compounds daily at the current interest rate (presently 3% per year). Makes paying the current tax due (if any! You may be owed a refund, after all, and the IRS doesn’t pay interest on money you’ve failed to claim from them) fiscally savvy.

B. You can do it from home, in your pajamas
The IRS website (www.irs.gov/freefile) allows any taxpayer to file electronic returns free of charge. Gather last year’s tax return, your W-2s, 1099s and any other documents and use the IRS’s online, fillable forms to file. If you are itemizing deductions, don’t forget to include any charitable contributions, reduction in income from qualified IRA contributions, any capital gains or losses, etc. Once you’ve completed the online form, you can even set up direct deposit for any refund you may be owed, or pay electronically if you have a tax liability. Note the free e-file forms perform only basic calculations.

C. If you start the process and become overwhelmed, you can file for an extension
The IRS allows a one-time, six-month extension, which can be filed online using the IRS website and then filling out and submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This extension does not grant an extension of time to pay, however, so you’ll have to estimate any tax due for the year and pay it on time. If you cannot pay the tax due, paying a portion of it will reduce any subsequent interest and penalties on the remaining balance. And yes, the IRS accepts Visa (as well as most major credit cards).

And if you choose not to file? If next week arrives, and you find trying to avoid the IRS radar becomes unsuccessful for this or past years’ returns, contact a tax professional to advise you on how best to resolve your tax issues.

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