Cutting Through the Confusion of Inheritance Tax
In the simplest terms, an inheritance tax is a state tax that’s imposed on the receipt of assets from someone who passes away.
The extended tax filing deadline of July 15th proposed by the People First Initiative tax relief is quickly approaching, while many Americans continue to face significant financial hardships as a result of COVID19. Taxpayers that had not yet filed by March 15th must do so now, and those who had set up a payment agreement must resume payment to avoid penalties and potentially an agreement default. While the thought of filing your taxes can be overwhelming during these times, it is highly encouraged that you file something by July 15th as failure-to-pay penalties can be severe.
If you are unable to file your tax return under your current circumstances, you may file Form 4868 by July 15th for a three-month extension, thus allowing you to prepare the form until October 15th.
While you may request an extension for filing your form, there is no extension on your payment. Therefore interest begins accruing on July 15th.
The IRS may abate penalties for “reasonable causes,” however, these are limited. Claiming a prior year illness, for example, may not be applicable, but proof that you have been severely affected by the current pandemic might have a better chance of being taken into consideration.
If you have a clean IRS record, you may be eligible for a "first-time” abatement.
If you initiated a payment agreement earlier this year and did not make any payments between March 25th and July 15th, given the People First Initiative tax relief, it is now time to resume payments. Applicable IRS agreements include: Installment Agreements, Offers in Compromise, and Private Debt Collection Payments.
Some steps you should take to resume your IRS agreement:
If the agreement was suspended between April 1st and July 15th, you must pay by the first monthly payment deadline after July 15th. While the IRS did not default the agreement for this time period, interest did accrue on the balance owed.
If you opted for direct deposit payments and canceled them during this time period, you should contact your bank as soon as possible to ensure the first monthly payment will be issued on July 15th or as applicable, per your agreement.
If you are unable to meet the extended deadline given to COVID19 related hardships, you are encouraged to contact the IRS to possibly revise your agreement. You can reach out to them by visiting IRS.gov/paymentplan or calling the customer service number on their IRS notice if you have a Direct Debit Installment Agreement (DDIA).
All in all, always keep in mind that the failure-to-pay is immediate and large. If you cannot afford to pay your taxes, you should, at the very least, file your return. If you have not yet done so, contact the IRS to explore your options.
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