IRS deadline could add to some people's debt management woes

10.11.09
By Nicholas Storie

Some people struggling with debt management issues may find themselves deeper in the financial hole next week if they fail to file outstanding federal tax returns with the Internal Revenue Service.

That's because Thursday, October 15 marks the deadline for people who requested six-month extensions for filing their federal taxes back in April. According to the IRS website, as many as 10 million Americans are thought to have requested such extensions. Some exemptions will still remain for military personnel who are serving in combat zones around the world or for people living in areas recently affected by natural disasters.

The IRS noted that people will be able to take advantage of the e-file and Free File programs up until the 15th for their 2008 taxes.

People who owe less than $25,000 in federal taxes and who have no outstanding tax issues from previous years may be able to enroll in an installment plan that allows them to get caught up over a selected period of time. However, the IRS notes that paying one's entire tax burden as quickly as possible will result in more financial savings.

Elsewhere, an Associated Press report quotes Tom Ochsenschlager of the American Institute of Certified Public Accountants as saying "the bottom line is, file, even if you can't pay." The wire service also advises taxpayers to determine whether they are eligible for any tax credits or deductions, which would require an itemized filing.

October 15 also happens to be the deadline for special offshore voluntary disclosures, giving taxpayers an opportunity to reveal any assets they have been hiding in foreign financial institutions in order to evade paying taxes. Failure to reveal assets by Thursday could result in criminal prosecution as well as steep civil penalties.

Overall, an outstanding tax burden is a good way to add to one's debt management troubles, especially if additional penalties are involved.

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People can make their debt problems worse by failing to keep up with taxes.