Welcome to the official blog of Brittany Lanphier, managing partner of Lanphier LLP based in Denver, Colorado!
Any tax guidance in this blog is intended for informational purposes only and is not guidance on which Lanphier LLP intends for you to rely. All tax issues specific to your business or family are largely facts-and-circumstances based and you should consult your tax advisor (or Brittany directly) to discuss how this might relate to you.
March 8, 2012
Well, despite best intentions, we have once again had an extended lag between posts on the ol’ tax blog. As usual, I have some perfectly credible excuses: 1) I had a baby last year. I don’t think the statute of limitations has run on that one yet. 2) We have had our beautiful new website under construction for the last few months, and we are now up and running. A huge thanks to Todd Glover and Denver Internet Marketing for all of their time and patience on this project.
Despite the radio silence, we have been firing on all cylinders at Lanphier Accounting over the last year, and especially now that tax season is in full gear. We continue to be thrilled and honored by the loyalty of our existing clients and the positive feedback we get from our new clients each year. We are also staying busy in the Lanphier household with our nearly-11-month-old (not sure how that’s possible) little ball of energy, Brooklyn. She is fully walking/almost running and making her parents reminisce about the days she used to lay on her back just kicking her legs, rather than making us run around the house closing every door and cabinet to keep her contained.
The Importance of Filing Timely Tax Returns
Before I get back to the grind, I wanted to take a few moments for a little public service announcement. You are welcome.
FILE YOUR TAX RETURNS. ON TIME. EVERY YEAR.
Times are tough. No one needs me to remind them of that. But every month, we see clients – both at Lanphier Accounting and at Dennis’ law practice, Denver Tax Counsel – in heaps of tax trouble. This is almost always because of tax returns that weren’t filed, possibly even for years at a time.
Frequently, we are asked the questions, “Would it be better for me to wait to file my return until I have the money to pay?” I understand their reasoning – buy some time, stay off the grid, and wait until you have the resources to take care of it. The problem is that the IRS does not see it this way and will punish you stiffly for it.
“Failure-to-pay” penalties – meaning you have filed the return, the IRS knows you owe the money, but you just couldn’t pay the bill on time – are typically 0.50% per month. If you enter into an installment agreement for the amount owed, this penalty is reduced to 0.25% per month. By constrast, the “failure-to-file” penalty is 5.0% per month, with a maximum of 25%. This means that even if you only wait a few months to file your return late, your bill will be significantly larger than if you had filed on time and simply tried to make modest monthly payments on the balance. Did I mention that interest will accrue on the tax and the penalties this whole time? The bigger your tax debt, the worse of a deal this is for you.
The IRS has made efforts in recent years to assist taxpayers with unpaid tax debt. Just in the last few months, the dollar threshold for a streamlined payment agreement went from $25,000 to $50,000 (which was previously increased from $10,000) and the maximum payment term was extended from 5 years to 6 years. Additionally, for just this year, the IRS is offering abatement of the failure-to-pay penalty to some unemployed individuals for the 2011 tax year, if you can pay by October 2012. Notice that this abatement only applies to the failure-to-pay penalty and not the much meaner “failure-to-file” penalty.
In summary, there is no need to be embarrassed is you find yourself unable to pay your tax bill, and the situation gets much worse if you choose to ignore it. There are ways to deal with the problem, and you should speak to a qualified professional about your options. Most importantly, FILE YOUR TAX RETURN. Even if it’s ugly. Even if you can’t pay.
I haven’t even scratched the surface on this topic. If you find yourself in a bad tax fix, give us a call. While there is a lot of garbage advertising out there, making big promises about reducing and eliminating your tax debt, we can give you honest straightforward answers on your options.
Well, time to get back to that pile of tax returns!
Until next time…which will hopefully be before next year. I will check Brooklyn’s schedule.