Tina has a very complex tax return and it looks like she will not be able to file her tax return by its due date. When is her tax return due? What are Tina's options for paying her tax due and filing her tax return this year? What are the consequences if Tina does not file or pay her tax in a timely manner? Be specific.

Question

What will be an ideal response?

Answer 1

Tina's tax return is due on April 15th. Tina may request an automatic six-month extension to file her tax return (i.e., until October 15th). Extensions allow the taxpayer to delay filing a tax return but do not extend the due date for tax payments. If a taxpayer fails to pay the entire balance of tax owed by the original due date of the tax return, the IRS charges the taxpayer interest on the underpayment from the due date of the return until the taxpayer pays the tax. The interest rate charged depends on taxpayer type (e.g., individual versus corporation) and varies quarterly with the federal short-term interest rate. The interest rate for tax underpayments for individuals equals the federal short-term rate plus three percentage points. Penalties are also imposed when a taxpayer fails to file a tax return. Also, there is no statute of limitations if Tina fails to file her return.