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Are you worried that you won’t be able to file your tax return before the April 15th deadline? Here’s a secret about unpaid back taxes that very few taxpayer know about. A high percentage of tax debt is actually from fines and penalties the IRS hits you with for failing to file your tax return. Paying late is bad too but the really big penalties that add up fast are failure to file penalties.

That’s why filing a Tax extension is critical to your eventual ability to pay off your IRS debt. It’s not uncommon for my client’s original tax debt to be $20,000, but with penalties and IRS fines their bill from Uncle Sam is often two or three times that original amount by the time they hire me.

The IRS system is designed to make sure you file your return but it’s a flawed system. The current system often causes people to avoid filing for even longer, and that leads to more penalties and tax debt. Meanwhile, the U.S. government doesn’t get paid. No one wins.

Let’s look at the simplest option for filing a tax extension:

Don’t worry; you can file a tax extension by filling out this form (, and submitting it to the IRS no later than April 17thIf you plan on mailing this form it must be postmarked no later than April 17th and will give you a six-month extension with no late penalties.

If you don’t think you can file your tax return by the April 15th deadline, you still need to fill out this form to avoid the penalties.  If you fail to file a tax return, you will be charged 5% of your unpaid taxes for every month that you are late filing your tax return.  You can be charged up to 25% and the minimum penalty is $135. The only exception is a reasonable excuse for the IRS, but we wouldn’t recommend relying on that.

Since penalties for failing to file a return are worse than penalties for failing to pay on time it’s better to pay as much as you can when you file and then work out an IRS payment plan that lets you pay off your IRS debt over time. Tax payments are still due on April 17th, and any late payments will be charged .5% of your unpaid taxes per month, plus interest (currently at a rate of 3% a year).

There’s more good news. The IRS has been working hard to raise their collected revenue and realize that in our current economy a more flexible approach is likely to net them more money. Last year they rolled out the 2012 Fresh Start Program and that program is still available as I write this in March of 2013. You can read about the 2013 IRS Fresh Start Plan here.

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