Growing up, I had always been under the impression that the IRS was the most brutal of government agencies. To receive an audit from them was nothing short of misery and once the IRS had you in their sights, there was no escaping the financial nightmare. Now, having experienced the IRS a few times on my own, I have to say, they seem like a pretty nice group to me. Am I alone in thinking this?
For example, I filed my taxes on April 15th this year, primarily because I knew I owed the government a nice chunk of change. Being self-employed has it’s benefits but come tax time, it sucks. I’m responsible for paying all of my income taxes quarterly, as well as footing the full bill for social security and medicare. Never having been self-employed before, I was a little light in the tax law and rather than paying estimated taxes in 2010, I decided to foot the entire tax bill in 2011.
The problem I encountered along the way however, was that I couldn’t afford the whole thing on April 15th! Instead, I paid a portion of my bill and asked for an extension to pay the rest. I received a pretty well laid out letter in the mail mid-May asking me to call the IRS to create a payment plan, make a lump sum payment, or arrange an alternative method of payment. I called that number, and was pleasantly surprised of my options.
I decided to take a four-month extension, which lasts until September 15th. This extension allows me the freedom to pay as much or as little as I want on my 2010 tax bill during any given month, and as long as the bill reads $0 by September 15th, I owe no additional penalties or interest. The downside to this plan is that I will be paying interest during the extension.
After about 10 minutes on the phone with the representative, he clued me into something I had no idea existed. Apparently, every three years the IRS can forgive a taxpayers interest and fees accrued during a tax year. In my situation, this means that the penalties I incurred because I didn’t make estimated payments, didn’t pay my balance in full and decided to take on a four month payment plan, could be forgiven. Once I finish paying my 2010 tax bill, I can simply call back in to the IRS and request a refund for the fees and penalties. So long as I don’t make a habit of this in the future and promise to pay my taxes on time going forward, a refund check should be granted. Pretty sweet if you ask me.
Perhaps I’m naive in thinking the IRS has changed because I have no idea of how they used to be but now that I’ve been audited once, and given an extension to pay once, I’ve gotta say things have gone unexpectedly smooth. Sure, my tax situation is simple when compared to corporations or small businesses but conquering an audit quickly, then receiving a refund for penalties and fees has got me thinking I don’t mind the IRS so much.
Pride before the fall. Hopefully not this time.
Published or updated June 28, 2011.