- Learn how things are changing at the IRS due to the COVID-19 crisis.
- Find out what to expect if you filed an amended return.
- Learn how tax penalties and fees add up if you wait to pay your tax liabilities.
- Find out what to do if you can’t pay your liability all at once.
- Discover ways to pay your tax liability.
You know that long list of ways that the coronavirus has affected our lives? Well, here’s another one. The Internal Revenue Service has completely flipped a switch on its priorities. It is not even looking at paper tax returns that are being sent to it.
The idea of all those envelopes piling up somewhere is a bit mind-boggling. But, it’s apparently what’s happening as the Treasury Department focuses on generating the stimulus checks that American taxpayers need to get through the crisis.
If you don’t have a tax liability and you’re not looking to amend a previously filed tax return, this shift won’t mean much to you. Relax knowing that the tax return and payments that would have been due in April are now due July 15th. But if you were hoping to get a refund from a previous year’s amended tax return, or if you owe the IRS money, you need to pay attention. Fiducial has the details for you.
Amended tax return
For the first of these two categories – the folks with amended tax returns – what you need to know is that you’re not likely to see any kind of response for quite a while. There’s no way to find out what the status is of your amended tax return and the agency is pointedly advising people not to interpret the lack of response as a need to send in a new one. Doing so would just confuse things more. You need to sit tight.
Owe money to the IRS?
If, however, you owe the IRS money from before the crisis, there are no breaks on the penalties and interest. They just keep stacking up. It may take the agency a while to get around to figuring it out, but if you decide to sit and wait ‘til you hear from them, you’re going to be in for a big shock. Your tax liability is not only still there, it’s adding on interest from the time that it was due. This is true on your amended tax return(s) that reflects a tax liability as well.
How much could that tax liability cost you?
It could add up to a lot. Not only do you owe the original amount of your tax liability, you are also subject to accruing interest and a failure-to-pay penalty of 0.5% of your original liability for each month (or partial month) that it hasn’t been paid. That can rack up to 25% of the tax liability. There’s also a penalty if you failed to file on time, and that can add up to another 5% of the amount that you owe each month.
Even if you can’t afford to pay your entire tax liability all at once, you’re much better off paying small parts over time than waiting and having all of that interest added to your debt. You can contact the IRS online to arrange for one of their installment agreements.
Ways to pay your tax liability
Remember that mountain of returns piling up somewhere? Keep that in mind when you’re ready to send the IRS your money. If you are including a check, be sure to get a proof of mailing. This way, you can prove to the IRS that the interest and penalties stopped accruing on your tax liability with your filing and payment. Of course, you can opt for paying electronically via direct payment. Don’t worry about the fact that the paperwork is sitting in that big pile. The agency will eventually get around to going through it.
If you have any questions about your tax liabilities, amended tax returns, or current IRS operations, please contact us. Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.