How to undo your miscues with the IRS

How to undo your miscues with the IRS Let's talk about the queasy feeling that some of you have today because you're in trouble with the Internal Revenue Service.

The bottom line is nothing will make that feeling disappear until you take the proper action.

Let's go over some of the mistakes that get consumers into hot water with the IRS and what the consequences and options are.

Do any of these fit your situation?

• You owe money, but you're broke, so you didn't file a return last week.

In this recession, a lot of people are having financial difficulties, said John Hewitt, founder and CEO of Liberty Tax Service, which has 142 franchises in Virginia.

Sometimes, if your return arrives a few days late, the IRS will cut you some slack and not penalize you, he said. Otherwise, you may wind up paying what you owe, plus interest and a combined 5 percent in penalties.

Specifically, the IRS says you'll pay a 4.5 percent late filing penalty plus a 0.5 percent late payment fee.

"The sooner you file and correct the problem, the less it's going to cost you," said Barbara Weltman, a tax attorney and author at the J.K. Lasser Institute, a publisher of tax, financial and business books and newsletters.

• You mistakenly thought you could ask for an extension later.

April 15 was the deadline for doing that. Consumers who filed Extension Form 4868 by midnight have until Oct. 15 to file.

• You don't realize you can ask for a three-year installment agreement.

If the amount you owe is under $10,000, call the IRS at (800) 829-1040 and ask for Form 9465, an "Installment Agreement Request."

You'll pay a set-up fee of $43 to $105, depending on how you opt to pay and whether your income is low.

You can't have paid your taxes late or participated in an IRS installment arrangement previously and you have to give the IRS whatever information it asks for to prove you can't pay the money now.

If you didn't file for an extension or set up this, or one of several other IRS payment arrangements, by last Wednesday, you'll pay penalties plus interest.

• You realized after filing on time that you made a big mistake on your return.

File a Form 1040x, an Amended U.S. Individual Income Tax Return.

"The only thing you have to put in on the 1040x is whatever you want to correct," Weltman said.

You may or may not wind up owing taxes because of the mistake. But at least you won't pay the late filing penalty.

• You didn't pay anything because you would have had to put it on an overloaded, high-fee credit card.

Good thinking, unless you have money coming soon and could pay it off.

In addition to what you charge on the card to pay the IRS, there's a 2.5 percent fee that authorized card processors are allowed to charge you, Weltman said.

"The good news is if you itemize, you get to write off the fee."

• Got questions?

Call the IRS at (800) 829-1040.

Contact Iris Taylor at (804) 649-6349 or .