ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, April 14, 1997 TAG: 9704150042
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF/THE ROANOKE TIMES
MIDNIGHT TUESDAY is the deadline for filing your 1996 federal income taxes. What happens if, for some reason, you can't complete the forms in time or if you can't pay the bill?
The answer is that you should do something, even if you can't do it all.
If you can't finish the return, you can qualify for a four-month filing extension, delaying the deadline until Aug. 15. That's an automatic right for taxpayers.
But an extension for finishing the form doesn't excuse you from paying your taxes on time. You must make the best possible estimate of what you owe and send a check for that amount, along with Form 4868. The government charges a penalty if you pay too little, so it's to your benefit to estimate on the high side and, if necessary, claim a refund when you file before August.
If you don't have the money to pay the government, on the other hand, you should file your regular return or your request for an extension without fail. This will allow you to avoid a late-filing penalty, which is a stiff 5 percent of the taxes due, per month.
Send as much of the tax money as you can afford to pay. The Internal Revenue Service will bill you for the balance that's due.
You can ask to pay in installments by using Form 9465, but that will cost you $43. In addition, the IRS will charge you a penalty of a half of one percentage point a month plus its interest rate - currently 9 percent - on any underpayments.
That works out to an annual interest rate of about 15 percent, so many people probably will find it cheaper to take a loan from a bank to pay the tax tab.
Keep any records that support your tax return, such as receipts and canceled checks, for at least three years from the date the return was filed or the tax was paid. But you must retain forever those records that pertain to the value of your home and contributions to your Individual Retirement Account.
If you are having a problem calculating your taxes, the instructions tell you how to fill in the first part of your form. The Internal Revenue Service will then figure the tax you owe and any refund, the earned income credit and the like. To qualify for this assistance, your taxable income must be less than $100,000, and you must take the standard reduction.
Using the stick-on mailing label will expedite processing of your return. So does putting your forms together in the proper order.
Watch your math in the last-minute rush. And don't forget to sign the return. If it's a joint return, both spouses must sign.
Double-check your Social Security numbers for every person listed on the return. Make sure that the figures you report for interest and dividend income jibe with the forms you received from the payers.
Your chance of being audited is only about one in 100 unless you earn more than $100,000 a year or operate your own business. The IRS says that one in eight people who are audited wind up owing nothing extra.
The main problem with an audit is that you have the burden of proving your return is correct. Unlike a criminal trial, the government doesn't have to prove you're guilty.
The IRS conducts correspondence, office and field audits.
In a correspondence, the IRS writes to ask specific information about something on your return. You reply by mail, sending along copies (never the originals) of documents pertaining to the question at hand.
The office audit is held at an IRS office close to your home and also concerns specific questions about your return. But the scope of an office audit could broaden, so bring only those papers pertaining to the IRS questions. Never raise issues concerning to the rest of your return.
A field examination is conducted in your office or home and ranges over the whole return. Agents have the right to check your lifestyle against the amount of income you reported on your return.
You may represent yourself during an audit if you believe that you can handle the problem. Many people choose to be represented by a lawyer, a certified public accountant or an enrolled agent qualified to practice before the IRS. Tax preparation firms cannot represent you although they can explain how they filled out the forms.
Your representative may attend the hearing with you or may go in your place.
LENGTH: Medium: 89 lines ILLUSTRATION: PHOTO: CINDY PINKSTON/THE ROANOKE TIMES. Certified publicby CNBaccountants who helped answer questions in The Roanoke Times' recent
tax question-and-answer series include (front row, from left): Tim
Boitnott, C.J. King, Jim Taney, F. Fulton Galer; (back row, from
left): Gary Duerk, Stan Boatwright, Charles Equi, Reid Ammen, Terry
Clem, David Miller, Joe Schaben. Those not pictured are Richard
Beason, Bill Brumfield, Clark Cole, Mark Coles, Valerie Kowalski,
Harry Schwarz and David Wright. color.