How long does it take to file for a tax extention?

Question

I'm trying to help this couple get into a home and they did not file their taxes last year. They got paid cash and were separated and the husband did not file taxes, but has always filed prior. How long does it take to file a year late and what are the penalties. Is it still possiable to get a home loan? his credit score is 602 (not the best)?

Answer 1

You need to get the 2005 forms and get them completed as soon as possible. The penalty for late filing is 5% per month to a maximum of 25%, there is a late payment penalty on 1/2% per month. An underpayment of estimates and withholding penalty at about 8% per year plus interest at about 8% per year.
The late filing , late payment and interest are assessed on any tax due with the return. The underpayment penalty is computed on form 2210 filed with the tax return.
If you can get the return filed before December 31, 2006 you will stop the running of the penalty and interest.
If no tax is due with the return there is no penalty and interest.
They won't get a mortgage if they are delinquent in filing their tax returns.

Answer 2

It usually takes the IRS a max of 8 weeks to process paper forms and I don't believe you can file electronically if the taxes are not for the current tax year. If they don't owe and are due a refund, there should be no penalty. Talk to an accountant about the penalty amount if they do owe or go to irs.gov for more information. Check out the publications on that site that relate to your question. My husband had not filed for the 4 years prior to our getting married and while it took some time, he was due a refund for each year and didn't owe anything.

Good luck!