17 April 2007

Don't Forget To File Your Income, Gift and Fiduciary Return Extensions

Let's face it. It's April 17, 2007, your federal and Colorado income taxes (and income taxes in most other states) are due today (the April 16, 2007 deadline for Colorado taxes in the instruction booklet that went out is wrong). You aren't going to get it done. What do you do?

Mailing Tax Returns

I mail my returns because it is cheaper than e-filing and I trust that I can prove that I did it.

Always make a photocopy of tax returns before you send them unless you are faced with a choice of getting a copy made and missing the deadline, or not getting a coyp made and making the deadline. Meeting the deadline is more important, but you should have a copy of what you send if at all possible (copy the envelope you use too).

There is never a reason to use expensive overnight delivery to get your tax return or extension in on time. A postmark is sufficient to show timely delivery, and the time of receipt doesn't matter if you have a postmark. The United States Postal Service is cheaper that almost all alternatives.

Always get proof of delivery unless you don't have time to due it befor the tax return deadline. Your counter receipt is generally not legally sufficient proof of mailing although the IRS might, in its discretion, choose to have mercy on you if you can produce it and nothing else.

While a certificate of mailing is slightly cheaper (.95 cents on top of postage), and legally sufficient to prove delivery (although you can't track your item online), postal tellers don't understand it as well, so finding the proper form may be harder and the people beyond you in line will be annoyed by you. Use certified mail and do not request a return receipt. Don't drop it in the box, go to a teller and get a postmark stamp on your certified mail receipt, otherwise you can't prove that you mailed it if it gets lost before it gets into the postal system computer system.

First class mail is 39 cents for the first ounce and 24 cents for each additional ounce. Certified mail is an addition $2.40 without the return receipt.

Usually .63 cents of postage is enough for a typical tax return. When in doubt, put three regular first class stamps on the envelope and hope you get lucky, as this will cover up to four ounces, which is at the high end of what a tax return usually weighs.

According to 9News (I couldn't easily find the information at the U.S. Postal Service website) the late post offices open today where you can buy postage (which you need to do so you can get proof of delivery) are:

Denver Downtown Station, 951 20th St. (20th & Curtis) Until 7:00 PM

Denver General Mail Facility Open 24 hours 7500 E. 53rd Place (1 mile n. of I-70 & Quebec)

C. Springs Star Ranch Postal Unit, 3637 Star Ranch Rd. Until 9:30 p.m.

Greeley Main Post Office Station Open until 10:00 p.m. 930 39th Avenue

Lone Tree Postal Unit, 8878 Maximus Drive Until 10:00 p.m.

Longmont Main Post Office Open until 8:00 p.m. 201 Coffman St.

Parker Stonegate Village Contract Postal Unit, Open until 10:00 p.m. 16522 Keystone Blvd., Unit A-3

Pueblo Main Post Office Open until 8:00 p.m. 1022 Fortino Blvd.

For dropoff only (which means you've blown your change to get proof of delivery in hand or buy postage, you can go to the following places, and use Click and Ship if you must):

You can drop off your tax return and still have it post marked April 17 at these locations, but you can't purchase postage or any other USPS service.

Denver General Mail Facility, 7500 E. 53rd Pl. (N. Quebec & I-70) Until midnight

Denver Downtown Station, 951 20th St. Until midnight

Bear Valley Station, 7555 W. Amherst Until 10:00 p.m.

Capitol Hill Station, 1571 Marion St. Until 10:00 p.m.

Cherry Creek Station, 245 Columbine St. Until 10:00 p.m.

Lakewood Station, 10799 W. Alameda Ave. Until 10:00 p.m.

Mile High Station, 1421 Elati St. Until 10:00 p.m.

Montclair Station, 8725 E. 11th Ave Until 10:00 p.m.

Northglenn Station, 11887 Washington St. Until 10:00 p.m.

North Pecos Station, 1411 Cortez St. Until 10:00 p.m.

South Denver Station, 225 S. Broadway Until 10:00 p.m.

Sullivan Station, 8700 E. Jefferson Way Until 10:00 p.m.

University Park Station, 3800 Buchtel Blvd. Until 10:00 p.m.

Boulder Valmont Station, 2995 55th St. Until midnight

Colorado Springs General Mail Facility, 3655 E. Fountain Blvd. Until 10:30 p.m.

Colorado Springs Antares, 2641 E Uintah St. Until 10:30 p.m.

Colorado Springs Main Office, 201 E. Pikes Peak Ave. Until 10:30 p.m.

Colorado Springs Briargate Station, 8585 Criterion Dr. Until 10:30 p.m.

C. Springs Fort Carson Station, Bldg 1519 (Base personnel only) Until 10:30 p.m.

Colorado Springs Templeton Station, 4356 Montebello Dr. Until 10:30 p.m.

Colorado Springs Security, 5755 Kittery Dr. Until 10:30 p.m.

Colorado Springs Cimarron, 5925 E Gallery Rd. Until 10:30 p.m.

Colorado Springs North End, 2940 N Prospect St. Until 10:30 p.m.

Colorado Springs Rockrimmon, 5001 Centennial Blvd. Until 10:30 p.m.

Colorado Springs Cheyenne Mountain, 1540 S. 8th St. Until 10:30 p.m.

Colorado Springs West End Station, 204 S. 25th St. Until 10:30 p.m.

Colorado Springs Star Ranch Postal Unit, 3637 Star Ranch Rd. Until 9:30 p.m.

Grand Junction Foresight Mailhandling Annex, 602 Burkey St. Until midnight

Greeley Main Office, 930 39th Avenue Until midnight

Littleton Highlands Ranch Post Office, 9609 S. Univ. Blvd. Until midnight

Lone Tree Postal Unit, 8878 Maximus Drive, Lone Tree Until 10:00 p.m.

Longmont Main Post Office, 201 Coffman St. Until midnight

Longmont Twin Peaks Mail Processing Center, 1845 Skyway Dr. Until midnight

Loveland Main Office, 446 E. 29th St. Until midnight

Parker Stonegate Village Contract Postal Unit, Until 10:00 p.m.
16522 Keystone Blvd., Unit A-3

Pueblo Main PO, 1022 Fortino Blvd. Until midnight

Salida Post Office, 310 D Street Until 11:00 p.m.

Warning, 9News has been wrong about this in the past (not necessarily their fault, the USPS has gotten notable less good at handling predictable rush times in the last couple of years).

Federal Individual Income Taxes

Fill in (on line) and then print this form. It doesn't need to be signed. If you think you are getting a refund and live in Colorado mail it to "Internal Revenue Service, Fresno CA 93888-0002", if you think you owe money and live in Colorado, insert a check for your best guess of how much you owe and mail it to "Internal Revenue Service, P.O. Box 802503 Cincinnati OH 45280-2503."

It pays to file an extension, even if you can no clue what you owe and/or don't have the money to pay what you owe.

The federal penalty for failure to file a tax return by the extended tax deadline is 5% per month that you don't paid. The penalty for failure to pay by April 17, 2007 is 0.5% per month (plus interest, more if estimated taxes should have been paid) (failure to pay penalties reduce failure to file penalties dollar for dollar, so they don't overlap).

Also, if your return is more than 60 days late, the penalty will not be less than $100 or 100% of the tax balance, whichever is less. You will not have to pay the penalty if you can show reasonable cause for not filing (or paying) on time.

If you file six months later, and don't get an extension, you could be facing a maximum 25% penalty, while it you get an extension a 3% failure to pay penalty (and interest) is the only additional damage.

(Even bigger penalties apply for filing frivilous or for filing tax returns grossly screwed up in your favor).

Colorado Individual Income Taxes

In Colorado, your don't have to file an extension if you are getting a refund and there is no failure file penalty before October 15.

if you owe state income tax, 90 percent of your tax liability must have been paid on or before April 17, 2007 to avoid penalties. Any remaining balance due would be subject to interest only.

Individual taxpayers who owe state income tax should send in their payment with the "2006 Payment Voucher for Automatic Colorado Extension for Individuals" (DR 158-I). The voucher is on page 11 of the 2006 104 Colorado Form 104 income tax booklet. Visit our Colorado Income Tax Forms page to obtain forms.

Mail the voucher to:
Colorado Department of Revenue
1375 Sherman St.
Denver, CO 80261-0008

If you're right on the cusp of owing Colorado taxes, I'd suggest that you send in form DR 158-I with twenty or hundred bucks or whatever you can spare, just in case, to reduce your risk of owing penalties. While Colorado has no failure to file penalty until October, there are failure to pay penalties:

Penalty and interest charges on tax owed:

When at least 90 percent of the tax owed is paid by the April 17 deadline, taxpayers are charged interest only and avoid penalty charges as long as the income tax filing (electronic or paper) and balance owed are sent by the Oct. 15 extension deadline.
Those who pay less than the required 90 percent of the amount due on or before April 17 will be charged interest and penalty on the unpaid balance. . . .

Penalty and interest rates:

Interest rate during 2006 is 11 percent on tax owed. A discounted rate of 8 percent is available if the balance due is paid when the return is filed or within 30 days.
Penalty is 5 percent of the balance due for the first month past the April 17 deadline plus 0.5 percent for each additional month up to a maximum of 12 percent.

The time saved by not having to calculate petty penalties by overpaying slightly by today, is worth the money right there.

Gift Taxes

The federal income tax deadline (April 17, 2007) is also the deadline for gift tax returns for gifts made in 2006. If you made a gift of more than $12,000 to a single individual this year (even if you or the donor are married) you probably need to file a gift tax return on Form 709.

Gift tax returns extensions used to be always made on the income tax return extension form 4868. This has changed, now it is sometimes filed on Form 8892 and the front page of Form 8892 tells you which form to file (the Form 8892 is taxes are due at this time, or if you aren't filing a form 4868 for your income taxes).

Colorado does not have a gift tax.

Fiduciary Income Tax Returns

Decedent's estates and trusts also have to file income tax returns on Form 1041 and today is the deadline for them too.

Fiduciary Tax Return Filing Requirements:

– Estates: Gross income of $600 or more or a nonresident alien beneficiary.
– Trusts: Any taxable income, gross income of $600 or more, or a nonresident alien beneficiary. A return is also due if there is any taxable income.
– Grantor-Type Trusts: A trust treated as owned entirely by grantors may not be required to file Form 1041. The most common type of grantor trust that doesn't have to file an income tax return is a revocable trust (sometimes called a living trust).

Most life insurance trusts with only a life insurance policy as an asset also don't have to file because they usually have less than $600 of gross income.

Trusts almost always have a calendar year for tax purposes. In decedent's estates, date of death is the beginning of the first tax year. The first year can cover any period of 12 months or less that ends on the last day of a month. A tax year is chosen when the first fiduciary return is filed.

Extensions of time to file these returns are filed on Form 7004, a change from the forms and requirements found in many prior years. Signatures are no longer required and the extension is automatic.

Business Entities

If you have a business entity, other than a single owner LLC, and haven't filed a tax return for 2006, you've blown it already in all likelihood. Get thee to an accountant or tax lawyer (after they're back from their late April vacations).

Parting Words

Best of luck!


Jon W. said...

I e-filed early this morning, but I hit one snafu: according to TaxCut, I couldn't e-file my state return, because my street address and apartment number exceeded 19 characters. I have to believe this is a bug in the program, because I e-filed from the same address last year with TurboTax.

I really didn't want to bother with printing and mailing, especially since I bought a bundle with the $16 filing fee included, so I got creative with the address.

Andrew Oh-Willeke said...

I hope you didn't get too creative on the address.

Getting people to pay a $16 filing fee to e-filing is absolutely nuts!

Why make people pay for something that reduces IRS overhead? Why discourage people from doing something that often brings in revenue?