It’s the last weekend of 1040 season! Some folks think that happened six months ago, but many of us know that extension season is when you are up against it. Extended 1040s are due on Tuesday, and anything filed after that is late. Only people out of the country on a long-term basis might have any more time.
So what’s at stake? Is it really such a big deal to file your 1040 late? Especially if you have a refund?
First, let’s take a look at the penalties for late filing: five percent of any tax owed, up to 25% of the balance due, and interest on the unpaid balances.
But there are other drawbacks. You never start the statute of limitations if you don’t file. That means the IRS has pretty much forever to look at the year you haven’t filed for.
It doesn’t work that way if you have refunds coming. From IRS Publication 17:
Time for filing a claim for refund. Generally, you must file your claim for a credit or refund within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date (even if the due date was a Saturday, Sunday, or legal holiday). These time periods are suspended while you are financially disabled, discussed later.
If the last day for claiming a credit or refund is a Saturday, Sunday, or legal holiday, you can file the claim on the next business day.
If you do not file a claim within this period, you may not be entitled to a credit or a refund.
So if you don’t file, its two years and out for getting that withholding back. Each year stands on its own. If you didn’t file for, say, 2007-2009, and you only owed tax in 2009, you still owe it, but you get no benefit for the 2008 and 2007 refunds you didn’t claim.
So file on time. If you are missing information, file with what you have and amend later if necessary. Don’t let the perfect be the enemy of the good. Not filing can quickly become a habit, and it’s often a very expensive one.
Related: Penalties on Late 2012 Tax Payments (William Perez)
William McBride, The Long Goodbye to U.S. Corporations (tax Policy Blog):
If not moving abroad, many U.S. businesses have been moving to the individual tax code, where they are taxed once on profits that are passed-through to owners, rather than twice through the corporate tax and shareholder taxes. The end result is there are now fewer corporations than at any time since the 1970s. The chart below shows standard C corporations peaked in 1986 at 2.6 million, and declined to 1.8 million as of 2008, according to the IRS. Preliminary IRS data indicates the number of C corporations dropped further to 1.6 million as of 2010. The trend shows no sign of slowing down.
This has two important implications for tax policy:
1. Increasing the individual rate means increasing the tax load on business, as more taxes are run through 1040s.
2. While corporate tax reform is important, it misses a lot.
Christopher Bergin, The IRS Is Shut Down – And We Will All Pay (Tax Analysts Blog)
Tax Justice Blog, Paul Ryan’s Latest Idea: Enact the Spending Cuts Proposed by Obama, Ignore His Revenue Proposals. I’m good with that.
Janet Novack, As IRS Shutdown Drags On, Some Taxpayers Face Big Problems:
The IRS has said that once the shutdown was “fully complete” it stopped its computers from automatically generating new liens and levies on taxpayers’ property and that it is now seizing taxpayers’ property in only rare cases. But that’s no help to the taxpayers who had their funds frozen immediately before the shutdown or who were hit by notices that had already been printed and were mailed after the shutdown.
The government needs to use its money to chase people out of public parks, rather than to free your frozen funds.
Peter Reilly, Are CVS Stores Actually Good 1031 Targets ?
Detroit is back! Judge Hands Down Very Nearly The Longest Sentence Ever To Public Official For Corruption And Tax Fraud (TaxGrrrl)
TaxProf, The IRS Scandal, Day 155. This edition features reports that the IRS exchanged confidential taxpayer information with the White House. Anybody who doesn’t think this is a real scandal should share somebody’s confidential tax information sometime with your favorite Republican official and see what happens.
Jack Townsend, Article on DOJ’s Swiss Bank Initiative.
Leslie Book, Supreme Court: Woods Oral Argument This Week. ”As many tax procedure buffs know, the case presents an opportunity for the Court to decide whether the 40% gross valuation misstatement penalty applies in a variety of tax shelter transactions when partnerships have sought to concede the underlying liability on grounds that do not directly relate to valuation misstatements, such as the at-risk rules or the economic substance doctrine.”
Robert D. Flach brings your Friday Buzz!
The Critical Question: Should We Eliminate the Extraordinary Measures? (Donald Marron):
You’ve probably heard that Treasury will hit the debt limit on October 17 and soon thereafter it won’t be able to pay all of America’s bills. That second part is true: Congress needs to act soon—preferably before the 17th—so Treasury doesn’t miss any payments. But the first part isn’t: Treasury actually hit the debt limit way back on May 19.
So how did Treasury keep paying our bills? Extraordinary measures.
Interesting. It’s fiscal sleight of hand of the sort that would get you or me jailed.