Every year there are plenty of taxpayers who file a return with the IRS and then need to change it. The only way to do this is to prepare and submit an amended return, Form 1040X [Amended U.S. Individual Income Tax Return], to the IRS. Once filed, Form 1040X will become your new tax return, changing the information submitted in the original.

There are several reasons to amend a return:

• Your personal information was incorrect – This can include your name, social security number, or filing status. The latter is particularly important, as it can affect various thresholds that have a large impact on your tax due/refund.

• You received a new tax form – If you received a new tax form after you filed your return, you will need to file an amended return, especially if that form was a W-2 or 1099. Employers use these forms to report income to you and the IRS. The IRS knows you made this money and will hold you accountable for back taxes (not to mention penalties and interest) if you don’t report it.

• You missed a credit or deduction – If you forgot to claim a sizable credit or deduction when you originally prepared your return, then it may make sense to file an amended return, especially if it results in a significantly smaller tax liability or a significantly larger refund.

Before you can file an amended return, the original will have to be accepted by the IRS. If you e-filed, you should receive notification that your return was accepted. If you paper filed, your return is considered accepted when the mailed copy reaches the IRS.

There is a time limit for amending your return. An amended return must be filed within 3 years of when the original return was filed or within 2 years of when you paid the tax due, whichever is later.

As with most late tax forms, an amended return cannot be e-filed. You will have to print it out and snail mail it to the IRS the old-fashioned way.

When you do amend your federal return, it’s a good idea to amend whatever state returns you filed as well. The two are often interconnected, and you’ll want to make sure to avoid any legal trouble with your state as well.

Generally it’s a good idea to file your amended return with the same tax preparers that filed your original. You can use LateTax to amend your return if you filed your original return here. Log back into your account for the option of amending your return.

Nas’s new album may be titled Life Is Good, but that hardly describes the state of the Queensbridge rapper’s financial affairs. Turns out the man behind Illmatic owes the IRS a whopping $6 million in back taxes.

In fact, the IRS has already started garnishing his wages. When you’re an artist, that means the money your fans spend on your music – if they even bother to spend money – goes straight to the IRS. Technically, his wages are being garnished through the music publishing organizations BMI and ASCAP. As taxpayers, let’s hope Nas doesn’t have a lot of libertarian fans.

Lucky for him, Life Is Good is looking like one of the most anticipated rap albums of the year after his latest single “The Don” – a case of art imitating life, perhaps? – dropped earlier this month.

Nas is no stranger to tax trouble. Last year, Rolling Stone reported that he owed the IRS $6.4 million in back taxes. The agency filed a $514,298 tax lien in January 2011, a $3 million lien in February 2010, and a $2.5 million lien in October 2009. Plus he hadn’t paid his condo fees in almost a year and was struggling to make the $5,000 a month child support payments and $20,000 a month spousal support payments he owes ex-wife Kelis, whose milkshake may bring the boys to the yard, but has considerably less success with alimony checks.

Alas, no matter how successful his album turns out to be, it doesn’t look like it’s going to be a very bright year for Nas, but as Jay-Z noted, on a track with which I’m sure Nas is familiar, “Along with celebrity comes ’bout seventy shots to your brain.”

The dark back tax cloud got a bit of a silver lining earlier this month when the IRS announced it was expanding its ‘Fresh Start’ initiative to alleviate the back tax burden on unemployed and self-employed taxpayers who have been hit hard by the sluggish economy.

The agency is reducing failure-to-pay penalties for these taxpayers as well as doubling the back tax debt threshold that allows taxpayers to qualify easily for an installment plan of repayment.

The changes, however, will affect only two narrow groups of taxpayers:

• Wage earners who were unemployed for at least thirty consecutive days during 2011 or the 2012 tax season, and
• Self-employed individuals whose business income suffered at least a 25% decrease in 2011.

For penalty relief, the IRS will offer a six month grace period from failure-to-pay penalties on 2011 back taxes. The grace period ends on October 15, 2012 – the same date on which tax returns with an extension are due. If the tax debt is not paid in full by then, including all other penalties and interest, failure-to-pay penalties with begin to accumulate.

As with most IRS rules, income limits apply. No single tax filer with an income over $100,000, or married couple with an income over $200,000, can take advantage of the grace period. Nor can those whose tax bill exceeds $50,000.

Note, however, that interest charges, which the IRS cannot waive, will still accumulate on unpaid taxes at a rate of 3%. And if you don’t file or request an extension by the April 17 deadline you will still be subject to the failure-to-file penalty, which is even more severe than the failure-to-pay penalty.

The other half of the good news is that the IRS is doubling the limit on easy installment agreements. Now taxpayers who owe up to $50,000 of back taxes can enter into a streamlined installment agreement without having to furnish the IRS with a financial statement. Plus the maximum time over which back tax debt can be paid has been raised from 60 months to 72.

Doug Shulman, the IRS Commissioner, had this to say of the changes:

“We have an obligation to work with taxpayers who are struggling to make ends meet. This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.”

Often accused of being an unfeeling bureaucracy of tax persecution, the IRS can be fairly accommodating to those in need and will work with good-intentioned taxpayers to find an equitable solution to their back tax problems.

We here at LateTax have already written about all the reasons for filing late income taxes if you are due a refund. (You could get money back! With no penalties!) But what happens if you are filing a late tax return and you aren’t expecting a refund? Should you still file?

The answer is yes. Alas, the picture is not so rosy for you as it is for those late filers who will be rewarded with a nice chunk of change for their belated effort. The best you can hope for is limiting the amount you owe in penalties and interest. That’s right, if you owe money, there are penalties for filing and paying federal taxes late.

First, let’s break down the different types of late tax penalties. This nastiest of the IRS penalties is a failure-to-file penalty which occurs – you guessed it – when you fail to file a return at all. This penalty amounts to 5% of whatever you owe for each month the return is late, up to a maximum penalty of 25%.

The next kind of penalty you could incur is a failure-to-pay penalty. You get hit with this charge when you fail to pay the taxes you owe, whether you’ve filed or not. This penalty is far less harsh than the failure-to-file penalty, amounting to 0.5% of the taxes you owe for every month they’re not paid in full.

Finally, on top of the penalties, you are also responsible for paying interest on your late taxes. Interest rates change every 3 months. Currently they are set at 3% per year.

The moral of the story is that it’s better to file late than never. It’s best to file even if you can’t pay all of the tax due because the failure-to-file penalty is a whopping 10 times greater than the failure-to-pay penalty. The IRS will work with you to find a way for you to pay. They would far rather do this than have you avoid filing altogether.

Another lesson to be learned is that if you owe, it’s better to file sooner than later. Every day that you avoid filing or paying, penalties and interest accrue and your tax debt gets larger and larger.

Another great reason to submit a late return is to make sure you claim all the exemptions, credits, and deductions you’re entitled to. If you avoid filing, the IRS can file a substitute return for you using information culled from other sources.

In all likelihood, this substitute return will not be completely accurate and will not include many of the exemptions, credits, and deductions that can save you money. The only way to ensure you receive these potential savings is to file your own late return, in which case the IRS will adjust their substitute return and correct the figures.

And let’s not forget, the IRS can take even more drastic steps. If your taxes remain unpaid, the agency can force you to sell or mortgage your assets or take out a loan to cover your tax liability or it can directly levy your bank accounts, wages, and other income. Furthermore, a Notice of Federal Tax Lien could be filed, negatively impacting your credit.

It’s unlikely that your situation will ever reach such a point, but why run the risk? And why subject yourself to added penalties? Get started on your late tax return as soon as possible and you can mitigate the financial damage and lift a burden off your shoulders at the same time.

There are a number of good reasons you should late file your federal taxes, whether you foresee missing this year’s deadline or omitted to file your taxes from previous years.

Foremost, you could be due a refund, in which case you would get money without any penalties. But even if you owe the IRS money, you could limit the amount of the penalties for filing late. Either way, it’s wise to file.

So, how do you go about filing late? At Latetax.com, we can help you do just that, and to get you started we first outline a few important things you need to pay attention to.

First, plan ahead. We advise that you start thinking about the tax process well before the April deadline.  The sooner you grasp your present tax situation,  the sooner you can take the necessary steps to deal with it.

For example, if you’re aware you will not be ready to file by tax day, you can apply for a six month extension by completing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Form 4868 must be turned in to the IRS by the normal due date for filing, typically April 15 of each year, unless that date is pushed forward by a holiday or weekend. And what’s nice about it is that you need not worry about having to explain your situation to the IRS.

The IRS rarely asks you why you are requesting an extension. If an extension is rejected, the most common reasons have to do with incorrect information entered, such as names and social security numbers that do not match IRS records.

Note however that the IRS will require you to enter an estimate of your tax liability on your extension form. This amount would, in principle, be the same as the one you would have filed on your Form 1040 were you not requesting an extension. If you are uncertain, you can base your calculation on your returns from previous years.

The IRS will also suggest that you pay at least part of the amount owed in the case where you believe you may have a tax liability. This partial or full payment of your estimated liability is not compulsory.  The IRS will not reject your request for extension if you opt to pay nothing.

It will however increase the amount of interest tabbed on any unpaid taxes that you end up owing. You may even be charged a penalty for failing to pay your taxes in full by the April deadline.

Once your extension is approved, your new deadline for filing your late tax return will be October 15, unless delayed by a holiday or weekend. The new deadline granted by the extension is also the last date to file electronically. After the deadline you will have to submit a physical paper return to the IRS.

Physical returns, in addition to being inconvenient for you, take significantly longer for the IRS to process. Which means it will take a lot longer for you to get your refund. Filing online is by far the best way to get your refund fast.

Keep in mind that an extension of time to file does not equal an extension of time to pay. This is essential to remember when late tax filing. If you owe tax, you will be charged penalties and interest on the amount owed for as long as it remains unpaid after the April deadline.

Again, the important thing to remember when filing federal income tax late is to plan ahead. Seek late tax filing assistance from the IRS by submitting a request for an extension. Not only will you buy yourself an extra 6 months, you’ll avoid penalties and save yourself a lot of money.

Okay, so you missed the deadline to file taxes. Now you’re wondering why you should even bother with a late filing of federal taxes. If the IRS isn’t on your case about it by now, why put yourself through all the hassle?

The fact of the matter is that there are a ton of good reasons to get started on filing late tax returns. First of all, even if your return is late, the news may not be all bad. If you’re due a refund for withholding or estimated taxes paid, you could still get your money. The only way to claim the refund you’re entitled to is to file a late tax return.

“Is it too late to file my taxes?” you may be asking. Or, more specifically, “How late can I file taxes and still get my refund?” If you are due a refund, you have to claim it within 3 years or else you risk forfeiting it completely. The same goes for tax credits such as the Earned Income Credit (EIC). This means that you’ve got 3 years to file a late return and still get your refund. So if you haven’t filed your 2010, 2009, or 2008 taxes, you’ve still got time to file and get money back. The next deadline is April 15, 2012. If you fail to file 2008 taxes by then, you can say goodbye to any refund. The deadline for claiming a refund with a late return for 2009 is April 15, 2013, and so on.

Let’s say you’re self-employed. Then there’s another great reason for filing federal income tax late. If you don’t file, you won’t receive credit toward your Social Security requirement or disability benefits. Not filing means that no self-employment income is reported to the Social Security Administration.

If you were owed a refund from more than 3 years ago and you still haven’t filed, you may be thinking that there’s no longer any reason at all for you to bother filing late income taxes. You won’t get any money back from the IRS and they’re not charging you penalties on the un-filed return. But if you don’t file your own return, the IRS will file a substitute return for you based solely on information from other sources. This substitute return may erroneously have you responsible for taxes and the IRS will begin collecting procedures. In this case, in the interest of preventing further complications with the IRS, the best thing to do is file a return.

So in conclusion, late tax filing of federal taxes is nothing to be afraid of if you think you’re due a refund. In fact the only way to get your hands on that money is to file. Plus there’s no penalty. The best thing to do is to get started on your old returns right away.

Obviously, submitting an extension is the best case scenario when it comes to filing federal income tax late, but if the April tax deadline took you by surprise, or you haven’t filed a return from several years ago, then you will just have to incur penalties and go about late tax filing.

Generally, you are responsible for filing late tax returns for the past year as well as the previous six if any of those are un-filed as well, though the IRS could always ask for even older returns. You file a late tax return just as you would a normal tax return. The only major difference is that the deadline for filing online is six months after the original due date, when everyone who applied for an extension is required to file. If your tax return is later than this you’ll have to file the old-fashioned way, with a physical paper copy of your return.

The first step to filing late income taxes is to gather your old documents. This could be difficult, as they may have gotten lost or thrown out over the years. The two most important documents you will need are your old W-2 and 1099 forms. If you don’t have them, you could try contacting your old employers, and if that doesn’t work, you could always contact the IRS. They won’t give you a copy of these forms, but you can get a printout with all the information on it. A final option is filling out Form 4852, Substitute for Form W-2, on which you can recreate your salary records.

Another caveat as you prepare a late filing of federal taxes: make sure to use the tax form from the year you are filing. The IRS changes their forms every year, so you can’t use a current form for filing an old year’s return or vice versa.

Another helpful tip of late tax filing assistance is considering making a request for abatement. If the penalties surrounding your back taxes have become so onerous that you are unable to pay them, or exceptional circumstances have rendered you unable to pay, you can submit a request to the IRS to eliminate part or all of your penalties and interest, but not the initial tax base that created it. In general, in order to receive an abatement, the IRS requires you to demonstrate that factors beyond your control render you not responsible for the penalties. Family disruptions such as divorce or death, natural disasters such as hurricanes or earthquakes, and a large stretch of unemployment are just a few examples of reasons you can request an abatement. Most of the time an abatement will eliminate part of all of the penalties but not the interest due on the unpaid taxes. Even if only the penalties are waived this is still quite a victory, as they usually account for somewhere in the vicinity of 25% of an individual’s tax debt.

One thing to note, however, is that if you apply for an abatement and it is accepted, you will be asked to pay the rest of what you owe in full. If you are not able to pay this amount in full, requesting an abatement may not be the best course of action. In order to request an abatement you can send a written petition to the IRS or fill out Form 843, Claim for Refund and Request for Abatement. We at LateTax.com can also help you prepare the form and advise you on this matter by calling us at 1-855-TAX-LATE.

Hopefully you realize that filing federal income tax late is not as difficult or as it may seem. Though the best thing to do is ask for an extension, you can still file even if you didn’t do so. A late tax filing could get you a refund or at the very least save you money in the penalties that are building up every day.