Help me pay my taxes, long past the deadline

October 9, 2007 3:52 PM

I've already paid my 2005 taxes (and on time), but I technically haven't filed. Help me figure out what to do.

I filed my 2005 taxes online using H&R Block and paid via credit card. The payment went through. In November I got a letter from the IRS informing me that I hadn't actually completed the filing because I hadn't realized I'd needed to print out and sign a form at the end of the H&R Block online process, and that I needed to sign an enclosed form and return it by the end of November, 2006. For whatever stupid reason, I didn't, and still haven't. What's the best way to handle this?

I have a secondary question which sort of dovetails with the first: this year, I filed an extension on my 2006 taxes, which means I'll need to finish them in the next few days. They're simple, and I'm not worried. Here's what I am worried about: my income is a fellowship through graduate school. Because tax law is interperable, whether or not the fellowship is taxed or untaxed isn't clear cut. Of course I'd rather interpret it as being untaxed and save myself several thousand dollars. What complicates this is that I didn't realize it was (or legally can be considered) untaxable when I filed my 2005 taxes, so I'll be paying taxes on my 2005 income, and not paying taxes on my 2006 income. Is it legit for the same income source to be considered in two separate ways?

posted by soviet sleepover to Work & Money (13 answers total)

If you are sure that it is not taxable, you can go back an file a revised 2005 tax return and get a refund. However, it does draw attention to the question. I would want to submit a letter (with reference to the appropriate tax code) characterizing why the income should be recatagorized - which means that if I was going to do this, I would consult with a tax specialist. (If they are nice and you explain over the phone what you want, they should be able to tell you if you have a leg to stand on and how much it would cost for them to help you.) Obviously, I am not in any way a tax specialist - with luck someone more knowledgable will respond.
posted by metahawk at 4:03 PM on October 9, 2007

Response by poster: Thanks, metahawk. Actually to clarify, I'm not trying to get my already-paid 2005 taxes back; rather, I haven't actually filed taxes for 2005, even though I've already paid. That's what I'm nervous about.

The secondary thing is a much smaller worry.
posted by soviet sleepover at 4:16 PM on October 9, 2007

Sign the form and send it in. You may need to follow up with a phone call. But don't worry about paying a fine if you don't owe them money for that year. The IRS can be surprisingly reasonable.
posted by kuujjuarapik at 4:18 PM on October 9, 2007

I hate to say this, but I don't think the law is particularly unclear about graduate fellowships. As I understand it, the portion that you don't spend on educational expenses is taxable. Period. If you used any of your fellowship to pay tuition, buy books or necessary supplies, fund trips to research sites, etc., then you don't need to pay taxes on that. You do need to pay taxes on the part that you spent on rent, beer, etc. A lot of people don't pay taxes on their fellowships, and they almost always get away with it, because fellowships generally aren't reported to the IRS as income. (The exception, I believe,
is if you're an international student.) But they're breaking the law, and if they got caught they'd get in trouble. They probably wouldn't get in very dire trouble, because they typically don't prosecute people for small-scale tax evasion, but they'd have to pay a hefty penalty.

I'm not a lawyer or anything like that, but this is my understanding.

As far as what to do about the 2005 return, call the IRS, sound contrite, and tell them that you're sending it tomorrow. This isn't going to be a problem.
posted by craichead at 4:23 PM on October 9, 2007

Re: 2005. My understanding is that the IRS is much more lenient about filing than they are about paying. Just sign the form and send it in. They have their money so they are (mostly) happy.
posted by trinity8-director at 4:30 PM on October 9, 2007

Response by poster: Craichead, it's slightly more complicated than an ordinary graduate fellowship, and I have the "interprable"/untaxed on authority from an accountant (the accountant of one of my classmates; not MY accountant otherwise I wouldn't have these problems in the first place!).

Thanks very much for the reassurance re: the IRS's reasonableness. I wouldn't have ever suspected it, but I'm eager to see what happens!
posted by soviet sleepover at 4:33 PM on October 9, 2007

Shoot. I spoke too soon about fellowships and taxes. According to this, the only fellowship money that is tax free is money that you spend on tuition, fees, or required books or supplies for a particular class. Other books, travel, research, etc. don't count.
posted by craichead at 4:36 PM on October 9, 2007

I made the exact same mistake, and did not have to pay a fine because the IRS owed me money. Did they threaten you, or merely tell you to file?

I am positive that there is no cost for filing an ammended return. The IRS is slow (is it true that they hire from the very bottom of the accountancy majors?), but they do pay up when they owe you.

I'm a wimp. I pay an accountant to clean up my messes. You can actually deduct preparation fees. So far this has always saved me money. But I'm kind of an idiot when it comes to these things.
posted by gesamtkunstwerk at 4:37 PM on October 9, 2007

Craichead, it's slightly more complicated than an ordinary graduate fellowship, and I have the "interprable"/untaxed on authority from an accountant (the accountant of one of my classmates; not MY accountant otherwise I wouldn't have these problems in the first place!).

Well, in that case, you should probably trust him, both because he's probably right and because I doubt the IRS is going to bother to check.
posted by craichead at 4:48 PM on October 9, 2007

On your first question: The IRS really doesn't care about late filings that much if you're already paid up or have a refund coming your way. Especially if they owe you money; the IRS will just see it as money they can hang on to and let accrue interest. Just make sure you file within three years, because otherwise a slew of things can happen (you can lose your refund, for one)

As for your Fellowship, talk with whoever is administering the funds. They would probably have a better handle as to your fellowship money, and have probably will have a stock answer for you.
posted by Weebot at 4:52 PM on October 9, 2007

Several law schools have clinics to help low-income taxpayers in situations very similar to yours. I assume that you'd qualify as a grad student - but you'll have to check the income limits. Find one in your area.
posted by pril at 5:03 PM on October 9, 2007

I've been in this situation--call them, explain what happened, and tell them you're mailing the form in. Drop it in the mail, and follow up with a call to make sure they got it. You shouldn't be in any trouble.
posted by EarBucket at 7:40 PM on October 9, 2007

The IRS really doesn't care about late filings that much if you're already paid up or have a refund coming your way.

Yes they do! If you don't file, they conveniently have NO CLUE that you have paid in, and will bill you for the entire amount. Your filing is proof that you have paid.

I know this first hand. I didn't file, but taxes were withheld. I got dunned for the entire amount as if I never paid a penny and was threatened with a levy against my salary. YES they had copies of my W2s, but with no filed forms, they pretend the W2s don't exist.

File the form. Now.

Better to do that and then figure out that you owe something than to put it off and make things worse. Trust me, an IRS levy will make your life hell. They don't go by the same rules as a garnishment. They will take about 75% of your paycheck and say you can live on the rest.
posted by The Deej at 10:20 PM on October 9, 2007