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Filing Date: For electronically filed returns, the date of an electronic postmark given by authorized return transmitter is the deemed filing date. On page 2 of Form 1040, a taxpayer can designate a third party to discuss the return with IRS. The designee is not authorized to receive refund checks or bind the taxpayer to any agreements with the IRS.
Change of Address: IRS usually uses the address on last filed and properly processed return as the address of record. A taxpayer can file Form 8822 (Change of Address) if address has change since the last filed tax return.
Tax Extensions: IRS Section 6081 authorizes the IRS to grant six-month extension for filing a tax return (but not for paying the tax). Form 4868 is filed by April 15 showing the estimated amount of tax. Taxpayers no longer must pay the balance of tax due or sign the extension request to receive the automatic extension. Paying 90% of tax liability by the original due date will avoid the failure to pay penalty. The penalty for underpaying estimated tax is less severe than the penalty for failure to file. So it is critical to file an extension if one owes taxes but does not pay with extension. The taxpayer should pay the tax due on or before October 15 with the filing of the tax return. Otherwise late filing penalty is 5% per month as compared to late payment penalty of 0.5%.
Estimated Tax Payments: The penalty of underpayment of estimated taxes can be avoided if one of the following situations applies:
• Small Balance Due: The balance tax due is less than $1,000.
• No Prior-Year Tax Liability: Taxpayer had no tax liability for year 2008 or no requirement to file 2008 tax return.
• Using Prior Year Safe Harbor: Taxpayer paid through withholding and/or timely estimates at least 100% of 2008 tax liability. If AGI for year 2008 is over $150,000 then the safe harbor is 110% of 2008 tax liability.
• 90% of Current-year Tax: If the taxpayer paid at least 90% of 2009 taxes, then no underpayment penalty.
• Annualization Method: The taxpayer paid at least 90% of the 2009 tax based on annualization of actual year to date income for each quarter of the year. If this exception applies, form 2210 must be completed and attached to the tax return.
Installment Agreement: Taxpayers who cannot pay balance taxes with tax returns can request an installment arrangement from the IRS by using Form 9465. The failure to pay penalty is 0.25% instead of 0.5% for any month in which an installment agreement is in effect. IRS will grant installment agreements to taxpayers that agree to pay tax liability of less than $25,000 within a 60-month period.
For any additional questions, please go to www.irs.gov.
Parveen Maheshwari is a Certified Public Accountant. He can be reached @ 650-340-1400 or parveen@cpamax.com