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Last-minute tax tips

Posted: Thursday, April 11, 2002

IRS filing extensions

Extension documents are available from the Internal Revenue Service's Web site at www.irs.gov. To request more time to finish a return, get a four-month extension with Form 4868. And for those who have trouble paying their tax bill, the IRS has several payment options available.

To get the automatic extension, file Form 4868, "Application for Extension of Time to File U.S. Individual Tax Return," with the IRS by the regular April deadline, or make an extension-related electronic payment. Taxpayers can now file an extension request by phone or by computer instead of using the paper Form 4868.

The number is 1-888-796-1074. Use Form 4868 as a worksheet to prepare for the call and have a copy of your 2000 tax return. Enter the adjusted gross income and total tax amounts from that return to verify identity.

The system will give a confirmation number to signify that the extension request has been accepted. Put this confirmation number on the copy of Form 4868 and keep it as a record. By calling the extension line, taxpayers can choose to pay any expected balance due by authorizing an automatic withdrawal from a checking or savings account.

Taxpayers may also e-file an extension request using their own tax preparation software or by going to a tax preparer. As with the phone system, computer filers must provide two figures from the previous year's tax return to verify identity.

Filers requiring more time may be eligible for two additional months to file. Either write to the IRS or file Form 2688, "Application for Additional Extension of Time to File Individual Tax Return," and give the IRS the reason why the second extension is needed.

Late payment options

Taxpayers who have completed their returns but are unable to pay the tax due should not request an extension. File the return on time and pay as much possible. The IRS will send a bill or notice for the balance due.

Those who cannot pay the full tax due may qualify for an installment payment plan. The IRS offers a streamlined approval process if the amount due is not more than $25,000 and the taxpayer will pay it within a five-year period.

These agreements do not require a collection manager's approval and do not involve the filing of liens.

Taxpayers may request an installment plan when filing by attaching Form 9465, "Installment Agreement Request," to the front of the tax return, listing the proposed monthly payment amount and date. Filers may also choose to pay from a bank account each month through an automatic withdrawal program.

There is a $43 fee for setting up the installment agreement. Taxpayers will also pay interest, compounded daily, plus a late payment penalty. This penalty, usually .5 percent of the balance due per month, drops to .25 percent when the IRS approves the agreement, if the taxpayer filed the return on time and did not receive a levy notice.

Besides possibly qualifying for this reduced late payment penalty, people who cannot pay the taxes owed have another reason to file on time -- to avoid the late filing penalty of 5 percent per month of the balance due. Sending as large a payment as possible with the return will lessen any interest and penalty charges.

The IRS Web site at www.irs.gov has an interactive feature to help taxpayers determine their eligibility for an installment agreement and to download related forms. Form 9465 is also available by calling toll free 1-800-TAX-FORM (1-800-829-3676), or from IRS TaxFax. From a fax machine, call 703-368-9694 (not a toll-free number) and request item No. 14842 by return fax.

Options for paying taxes

A failure-to-pay penalty is levied against those who do not pay their taxes when they are due. To avoid this penalty, the IRS suggests several ways to pay taxes.

Taxpayers can pay by check, money order or credit card or use the direct debit method.

CHECK OR MONEY ORDER

If you choose to pay by check or money order, make it out to "United States Treasury." Please show correct name, address, Social Security number, daytime telephone number and the tax year and form number on the front of the check or money order.

CREDIT CARD

Taxpayers can charge taxes on an American Express, MasterCard, Visa or Discover card. To pay by credit card, call one of the service providers listed below and follow the recorded instructions.

Filers can also pay by credit card over the Internet using the service provider's Web site. These service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to the tax payment.

Official Payments Corporation

Phone: 1-800-2PAY-TAX (1-800-272-9829)

Web site: www.officialpayments.com

PhoneCharge Inc.

Phone: 1-888-ALL-TAXX (1-888-255-8299)

Web site: www.1888ALLTAXX.com

DIRECT DEBIT

Taxpayers can file electronically and pay in a single step by authorizing a direct debit (automatic withdrawal) from their checking or savings account. This option is available through tax software packages, tax professionals and TeleFile. Provide the account number, the financial institution's routing transit number and account type (checking or savings). Payments can be scheduled for any future date up to and including the April 15 return due date.

For more information about filing and paying taxes, or to request a copy of the form or publication, call 1-800-TAX-FORM (1-800-829-3676) or download them from the IRS Web site at www.irs.gov. Taxpayers may also call the IRS's toll-free customer assistance line at 1-800-829-1040, available from 7 a.m. to 10 p.m. weekdays and from 9 a.m. to 5 p.m. Saturdays through Friday.



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