With the 2011 tax extension deadline looming, there are numerous people who realize that they will end up having to pay but they’re just not sure how they’re going to be able to pay them. Yes if you had a great year on paper but the bank account just doesn’t reflect it, then you’re not alone. There are options for you, and there are a number of opportunities for you to get that monkey off of your back and focusing back on keeping your business moving forward and growing. Realize that nothing is hopeless and it’s just like having to work with a vendor. The IRS wants you to still succeed, because if you didn’t then they have no alternative in getting paid.
1. If you haven’t filed an extension for 2011, then it’s definitely too late for you. However you will still need to file that tax return so it’s important you complete it by September 15th if it’s a corporate return or October 15th if it’s a personal return. However you do have the opportunity to file what’s called a Form 1127A, which is the Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship. What this means for you, is that if your Adjusted Gross Income is less than $100,000 ($200,000 if married filing jointly), and you owe less than $50,000.
2. A payment plan is always an option, when you file Form 9465 which is only available if the amount you owe is less than $25,000 with your combined tax, penalties, and interest. Potentially you won’t need to worry about additional documentation, however if it’s over the minimum then you may need to report various other information including documentation for your income, assets, and expenses for which they will determine how much they feel that you can pay. Understand that if you work out this option, then at least you can pre-plan ahead of time, although you will still accumulate additional interest and penalties.
3. Making a settlement is an option that you can also pursue because it’s important to understand that you can potentially negotiate. This could mean a lower tax bill, interest and penalties because of the understanding that the IRS is interested in working with you. However should you consider pursuing this option, understand that you need to seek out a reputable CPA, tax attorney and/or Enrolled Agent to help negotiate on your behalf. It is not advisable for which you attempt to do this yourself, because you need someone in the industry who will understand exactly what you’re filing and explain it to you in plain English, so you’re not surprised by any potential issues at a later date.
4. If you are able to make your installment agreement happen, then there are key items you need to be aware of:
- pay at least your minimum monthly payment when it’s due (direct debit or payroll deductions make this easy)
- include your name, address, SSN, daytime phone number, tax year and return type on your payment
- file all required tax returns on time, and if you cannot pay all taxes you owe in full and on time, contact the IRS immediately to change your existing agreement
- continue to make all scheduled payments, even if they apply your refund to the account balance
- ensure your statement is sent to the correct address or use Form 8822 for a Change of Address
About Our Show Advisor: Dwayne Briscoe is the founder and owner of Bookkeeping-Results, LLC. Dwayne began his company in January 2007, based on the foundation to educate small business owners and bookkeepers who use QuickBooks®. Working as a full-charge bookkeeper and trainer in a variety of industries for over 15+ years, he is a certified Pro Advisor with 5 certifications, including Enterprise Solutions and Point of Sale. He is also an instructor at Brazosport College in Lake Jackson, where he teaches basic accounting, QuickBooks®, and basic payroll, along with hosting his own private classes.
Bookkeeping-Results, LLC has focused more on quality and not quantity for their clients, by paying attention to the details. Through regular continuing education participation, as well as exploring additional ways of “thinking outside of the box” to help expand people’s knowledge of their own financial well being, it’s important to focus on not only saving the client money but also making the client money.