Tax Myths Defined - The facts about the IRS and your taxes.

Myth: Filing an extension allows you a further six months to pay the tax owing on your return.

Even though an Automatic Extension Application gives you extra time to file, it does not give you more time to pay. It is critical that you correctly assess the tax outstanding and include the payment with your extension application. If you find you can't pay the full amount owing with your extension form, you can still get the extension but you will owe interest on the unpaid sum. Late payment, without reasonable cause, can result in a penalty. The IRS assesses interest and penalties from the date that they were originally due.

Myth: If you do not owe tax you should not file a return.

Even if it's not truly necessary, it's best if all taxpayers file returns that are due. Even if you discover that you do not have to file, it may be beneficial if you do. There can be multiple reasons why you might be entitled to a refund. As a business, even if you do not owe tax, you may be required to file a return. We recommend that all business and personal tax returns should be filed. Don't forget to keep a copy in case you get audited.

Myth: If you can't pay the tax on the return, you should not file.

You should always file your return on time in order to avoid the failure to file penalty. There are payment alternatives if you cannot afford the amount that you own, including using your credit card for payment. In some cases payment plans may be available for paying off overdue balances. Be aware, interest will accrue on any unpaid amount.

Myth: The IRS will usually “drop” penalties and interest on balances owing.

Late filing and late payment penalties may be abated if you have a good reason for doing so, such as a health condition, disaster, etc.. If you think that you have a good reason for late filing or payment then, when you get your bill for penalties and interest, send a copy together with a full explanation to your IRS service center. Don't forget to include any supporting documents as these will improve your chance of achieving an abatement. Although anybody can deal with their own tax situation, the process can be baffling for anyone not familiar with tax law. Having your complete request prepared by a tax specialist is always recommended. You need a tax expert to advocate on your behalf if needed and appeal the results if they are not in your favor. The IRS will not usually abate interest. Instead it will continue to accrue until everything (penalties, interest, and tax) are completely paid. The few exceptions to this tend to be in cases of extreme hardship or if the IRS made a mistake and you are not found to be liable for the full amount due.

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