Transcripts

"Kevin McCormally's Tax Tips"-Don't Miss the Deadline

SUSIE GHARIB: There are just days to go until the Federal income tax filing deadline. So every night this week, we're bringing you another last-minute tax tip that can help make it easier to file. Tonight, the futility of not filing. Here's our tax expert, Kevin McCormally, editorial director of "Kiplinger Personal Finance."

KEVIN MCCORMALLY, EDITORIAL DIR., "KIPLINGER'S PERSONAL FINANCE": It's a sickening feeling: Finishing your return and discovering that you owe more tax than you can afford to pay. Some peoples' solution -- to simply not file -- is a very bad idea. The IRS reserves some of its toughest penalties for failing to file. At 5 percent a month on the unpaid tax or $50 a month for every $1,000 you owe, it's 10 times higher than the penalty for failure to pay on time. You could pay what you owe with a credit card, but the fees are stiff and interest on the card could eat you alive.

Another alternative is to file a form 9465 with your return, asking the IRS to set up an installment payment plan. The government just jacked up the one-time fee for setting up these plans from $43 to $105 and your low interest and late payment penalties until the taxes are paid off. But it could still be cheaper than borrowing and it sure beats the fear of doing nothing and worrying when the IRS is going to catch up with you.

Now one big group of non-filers has nothing to fear from the IRS. This is the two million or so workers who fail to file every year, even though they have refunds coming. There's no penalty for failing to ask for your money back except the loss of your money. Right now the IRS is sitting on $22 billion in unclaimed refunds from 2003. If taxpayers don't file a return to claim their money by April 17th, the government gets to keep it. Why would anybody fail to file a return if you have money coming back? I'm sure many of these folks failed to file in earlier years and think they're in trouble. If you know someone who might be losing money by avoiding the IRS, you might want to call their attention to this commentary. Maybe they'll take you to dinner with some of their 2003 refund. I'm Kevin McCormally.