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Paying taxes illustration
April showers may bring May flowers, but it also brings Tax Day, specifically April 15 and an actual national holiday. And that’s enough to rain on anyone’s parade.
Taxes are complex, they are not easy to understand, and they often catch you on the wrong side of your personal budget. But, as American historian Albert Bushnell Hart said, “Taxation is the price that civilized communities pay for the opportunity of remaining civilized.”
OK, sure. But no matter what your personal feelings, taxes must be paid, or at least accounted for, and this is the one financial debt you can’t simply choose to ignore. My late father, who was an accountant and occasionally appears through his financial wisdom in this column, knew early on that his time was better spent earning the money each year to pay a tax specialist who has kept pace with changing tax landscape to handle his returns. If you have anything other than a simple financial profile, you may want to consider that option, too. After all, what you pay a professional tax preparer will be deductible on your following year’s return.
Whatever you decide, there are basic things that are worth knowing. Some of these involve tax extensions, the chance to defer your taxes due to special circumstances. There is some financial planning and preparation that goes into claiming some tax waivers, such as inheritance and estate tax waivers. These often are part of a larger financial strategy that involve legal as well as financial professionals and are well beyond the scope of this column.
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For most, tax extensions involve delaying tax obligations for a certain year. The IRS will automatically grant anyone a 6-month extension upon request, but that’s really only for tax paperwork. You will be expected to estimate what you owe and send in that amount by April 15. The IRS will accept your payment whenever it arrives, but you will pay penalties and interest accrued on a monthly basis on what you already owe, so it pays (literally) to be prepared and on time with your filings.
Excuses for late filings not prearranged that are not acceptable include laziness, ignorance, confusion, or the belief that paying taxes is optional. (It is not.) Claiming poor advice from a tax preparer or lack of help from the Internal Revenue Service also are not valid excuses.
However, there are few valid excuses for filing your returns and payments after the due date:
• Death or serious illness in the immediate family. The IRS may exempt you from penalties and interest when this occurs provided you have the necessary legal and/or medical documentation to prove your claim.
• Active military duty, especially in a combat zone. In this case, the IRS can tap Department of Defense records to find the names and Social Security numbers of deployed personnel. The delay will depend on the time and nature of your deployment, so it’s best to check with the IRS before assuming you qualify.
• Unanticipated destruction of tax records. If you house was flattened by a tornado, burned to the ground with everything in it, or suffered some other disaster that took your tax records with it you may be able to claim a waiver. I know what you’re thinking, but the IRS has already caught people attempting to stage such “disasters” and are prepared to look closely at any claim. Make sure you have whatever formal proof you can gather—police reports, eye-witness testimony or whatever you can find to prove your records were destroyed accidentally or coincidentally, not purposely. In this case, they won’t take your word for it.
One final exemption category includes taxpayers who are incarcerated at a time that would not have allowed them access to either their records or even have any income. Chances are that if you are locked up you have bigger issues to deal with. But know that the IRS still will be checking, and you don’t want to add to your sentence.