Hit hard by severe storms? You may qualify for a reprieve.
The IRS announced this week that victims of severe storms, straight-line winds and tornadoes that hit certain communities in Mississippi have until July 31 to file individual and/or business tax returns and make tax payments. It also means they have until that date to make 2022 contributions to their IRAs and health savings accounts, as well as submit any quarterly estimated tax payments, quarterly payroll and excise tax returns.
The IRS has the authority to push back the filing deadline for taxpayers in federally declared disaster areas. Last week, the agency said victims of severe snowstorms that hit parts of New York in late December have until May 15 to file.
Because of various natural disasters, most of California and parts of Alabama and Georgia have until Oct. 16 to file. For a list of other areas given extensions because of extreme weather events, go to irs.gov and search for “Tax Relief in Disaster Situations.”
If you live or have a business outside the covered disaster area but have been affected by the storms, the IRS says you can call its disaster hotline at 866-562-5227 to request an extension.
Can’t pay your tax bill? Here’s what to do.
Your instinct may be to hide from the IRS if you don’t have the money to pay your tax bill. But resist that urge.
Your first contact should be the agency — not the number you hear on a television or radio ad promising tax relief.
Go to irs.gov and click the link that says “Make a Payment.” There, you’ll find information about payment options. You may qualify for an installment agreement to pay off your outstanding balance over time.
You can also apply for what’s called an “Offer in Compromise,” or OIC. This program is intended to help people who are so financially strapped that it is unlikely the agency could collect all that is owed.
An OIC allows you to settle your tax debt for less than the full amount owed. Again, go to irs.gov and search for “OIC,” and then use the pre-qualifier tool to check your eligibility.
Still scared to file because you owe? Do it anyway.
File your return even if you can’t pay to avoid the penalty for failing to file. It will save you money.
There is a failure-to-file penalty, which is 5 percent of the unpaid taxes for each month or part of a month that your tax return is late. Ordinarily, the penalty won’t exceed 25 percent of your unpaid taxes.
And in case you didn’t know, the IRS charges interest on penalties.
Need more time? Seek a filing extension, but be prepared to pay.
Getting an extension to file is easy. You just need to submit IRS Form 4868 either electronically or by paper.
But an extension does not mean you get more time to pay. You still have to estimate your tax liability and pay that amount by April 18.
By the way, the IRS will automatically process an extension when you pay part or all of your estimated income tax electronically.
Turned 72 last year? Don’t miss this April 1 tax deadline.
You can’t hold on to your tax-deferred retirement savings forever.
If you have a retirement account, such as a 401(k), a traditional IRA, a SEP IRA or a SIMPLE IRA, there is an annual required minimum distribution, or RMD, that must start at a certain age. The Secure 2.0 Act bumped the age requirement from 72 to 73 starting in 2023. It’ll be 75 in 2033.
You have until April 1 of the following year after reaching the required minimum distribution age to make your first RMD payment.
So if you turned 72 last year and still haven’t taken your first RMD, you only have until April 1 to do so. And this is important to note: Even if you decide to delay your initial RMD until the April 1 deadline, you will still have to take a second RMD by Dec. 31.
If you don’t take the minimum distribution, there is a steep penalty on the amount not withdrawn as required. Starting this year, if an account owner fails to withdraw the full amount of the RMD by the due date, the amount not taken is subject to a 25 percent excise tax, down from the previous 50 percent. In some cases, the penalty could be 10 percent.
“The penalty may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall,” according to the IRS. File Form 5329, follow the special waiver instructions for completing lines 52 through 55, and attach a letter explaining why you believe you qualify for relief.