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Should You Delay Filing Your Taxes If You Owe?

By on January 17, 2012 in Tax

Should You Delay Filing Your Taxes If You Owe?Filing a tax return is a happy and sometimes desperate occurrence for many American taxpayers that are reliant upon a massive tax return to pay off debt, rebuild their savings, or to fund their lifestyle. They gather their tax documents quickly and rush out to get the tax return submitted as fast as possible so the IRS can get started on getting that check in the mail.

But what should you do when you after finishing your tax calculations you discover you actually owe the government money? Should you delay sending in your return and your extra tax that you owe? Or is it better to go ahead and send in everything to get it over with?

What To Do When You Owe Extra Income Tax

There are three ways to handle your tax return when it turns out you owe the government rather than them owing you a refund.

Wait As Long As Possible To Pay

The first strategy is to wait as long as you can to send in your return and your tax payment. This can be as simple as waiting until late in the tax season to send in your return. However, some individuals choose to extend out their tax payment as long as possible by filing for an extension with the Internal Revenue Service. By filing Form 4868 you can get an automatic 6-month extension on the filing deadline.

But be careful: the government doesn’t consider your inability to pay as a valid reason to avoid filing your return. Form 4868 shows valid reasons as being out of the country or if you need an extension if you file Form 1040NR or Form 1040NR-EZ. You will also owe interest on the amount of tax you owe. So while this can save you from paying today, it will end up costing you interest.

File Your Return, Schedule A Payment

A second option is to go ahead and file your return (so you don’t forget) and to schedule a payment in the future. You are not required to immediately remit payment to the Internal Revenue Service. However, as with the first option, you will want to pay your owed tax by the tax filing deadline to avoid paying interest on the amount you owe the government.

Submit Return And Pay

The third option is to just to the pain over with, submit the return, and pay the amount tax owed. While this isn’t financially the best option – you could earn interest in a savings account on the amount you owe up until the tax deadline – it the most simple. You don’t have to worry about forgetting to file your return and incurring interest and fees. You’re able to pay, move on, and focus on other aspects of your life.

Can You Afford To Pay Now?

Ultimately the strategy you decide on will be dependent upon whether or not you can afford to make your payment of tax owed now. If you don’t have the money available then you’ll need to delay payment until you can afford to hand over the cash to the government.

However, if you can afford to pay now then it is often best to either submit payment when you file your return or to at least schedule your payment. This will ensure you avoid any interest or penalties to the government and increasing the amount of money you have to pay.

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