Notes on the grumpy season

It’s that time of year again. It arrives the same time each year. A sign this time is here is the number of usually smiling people you see with scowls. Temporarily absent of friendliness and preoccupied with their thoughts, affected individuals may walk past you without greeting you.

Many of these grumpy people tend to be seen at the post office. What causes these good natured people to transform into Mr. or Mrs. Grinch this time of year?

It’s that damn April 15 income tax return deadline.

Part of the population among us didn’t rush to get their income tax returns completed and filed in the first week of February anticipating a large tax refund. Those who missed the early filing season, the procrastinators, are generally characterized by poor organization skills or excessive time demands and haven’t been able to find all their documents or organize the financial information needed to file an accurate and complete income tax return. Another group of slow filers who can’t be considered procrastinators are people who have had their income tax returns prepared and know they owe money. This knowledge has made them angry. With this group only time can make their smile return.

If you are one of the grumpy, let me say right now … I’m sorry. I know how you feel. I’m one of you. I haven’t had a refund in a long time. As you walk around in a poor mood, keep this in mind. It’s not the fault of your income tax return preparer that you have to pay income tax. Your neighbor didn’t cause this misery and neither did your dog. It’s not even the fault of any IRS agent or officer. It’s Tom Cotton’s fault and its Steve Womack’s fault. It’s the fault of all those elected officials who serve in Congress with Mr. Cotton and Mr. Womack and those who served before them. Congress writes our country’s tax laws to take your money to spend on programs so they can say they did something for you so you will vote for them in the next election. We need to write them and tell them to quit working for us.

Although I don’t think I can make you smile in the next few days, let me offer some suggestions that may help you get through April 15.

If you owe money and you have the money to pay your taxes, pay them by April 15 and retaliate by constantly looking for legal ways to reduce income taxes for 2015. Focus on developing an attitude of gratitude for your success and acknowledge all the people in your life that helped you succeed.

If you owe additional taxes for 2014 and you don’t have enough money to pay the amount in full, the Internal Revenue Service, the Arkansas Department of Finance and Administration, and most state tax authorities will work with you to get your liability paid. The worst thing you can do is to let April 15 come and go without contacting the appropriate agency.

If you owe additional taxes on your U.S. Income Tax Return and you won’t have the money by April 15 to pay them, the odds are you can apply for an automatic installment agreement online. Another option would be to complete and submit Form 9465 Installment Agreement Request with your income tax return. To qualify you must owe less than $50,000. There are some other requirements required by the IRS to set up installment payments, buy none should be a deal killer.

If you owe additional taxes to the states of Arkansas or Oklahoma, pick up your telephone and call to arrange payment of your past due taxes. Arkansas’s Individual Income Tax Department telephone number is 479-682-1100. The Oklahoma Income Tax Commission telephone number is 405-521-3160.

If you need additional time to file your income tax return, do what I plan to do this year, file an extension. The Internal Revenue Service allows you to extend the due date of your income tax return by filing Form 4868 Application for Automatic Extension of Time to File U.S. Income Tax Return. This automatic extension allows you to file your income tax return anytime before Oct. 15, 2015 without the income tax return counted as filed late. Arkansas and Oklahoma will accept your tax returns as extended if you properly file an extension for your federal return and don’t owe them money.

When you file for an automatic extension of time to file your income tax return, you need to pay particular attention to what permission the IRS grants. It is only the filing due date that is extended, not the payment due date. It does not grant you any relief for the income tax due on April 15. Any income tax liability paid after April 15 will result in interest and penalties. Oklahoma has the highest annual interest rate, 15%, for late payment followed by Arkansas’ 10% and then the U.S. Treasury’s rate of 3%.

Penalties are assessed a bit differently. Oklahoma assesses a one-time 5% penalty for late payment of taxes where Arkansas assesses a 1% penalty each month up to 35%. So if you waited exactly one year to pay the tax you owed, the Oklahoma combined penalty and interest rate would be 20% and the combined rate in Arkansas would be 22%. Ouch either way.

Our U.S. Treasury is kinder and gentler than either state. With a late pay penalty of ½ % each month capping at 25%, the combined interest and penalty for late payment would only be 9% after one year. The lesson to be learned is pay off the states before you pay off the feds.

Whatever you do don’t file your income tax returns late if you owe tax. Late filing penalties are substantial. Both the IRS and Arkansas assess a 5% per month late filing penalty. The difference is the IRS caps the penalty at a maximum of 25% of taxes owned and Arkansas’ maximum is 35%.

We’ve heard the tire phrase all our lives the only two things certain in life are death and taxes. In the next few days if your CPA tells you to make the check payable to the U.S. Treasury, though it may not feel like it at the particular moment, remember he or she is you friend and ally.

Don’t shoot the messenger.