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What should you do if you owe money to the IRS for your 2001 taxes, but don't have enough money to pay what you owe by April 15th?  Here are a few suggestions to help you buy some time:

If you can pay most of your taxes by April 15th

If you're able to pay at least 90% of your total tax liability, as reflected on your Form 1040, all you need to do is file for an extension of time to complete your tax returns. This strategy allows you to defer paying as much as 10% of your 2001 federal income taxes until August 15th. Keep in mind that the IRS will assess you interest on the balance due (of approximately 7%), plus will also assess a "failure to pay" penalty of 0.5% per month on the balance due. So expect to pay an additional 13% on any money owed to the IRS.

To file for an extension, simply complete and submit a Form 4868. Remember, for the extension request to be valid, you need to have paid in at least 90% of your total income tax liability prior to April 15th. Otherwise, your extension could be deemed null and void by the IRS, and you could end up being hit with the 5% per month "failure to file" penalty.

If you'll come up with the balance due in the not too distant future

Let's say that you don't have enough money to pay your taxes by April 15th, but anticipate getting the money to cover the shortfall during the next month to six weeks.  If you're in this boat, make sure to file your tax return by April 15th, and include a check to the United States Treasury for as much as you can afford to pay at that time. During the month of May, the IRS will send you a bill reflecting the balance of taxes that are due. Soon after receiving the bill, send in a check to the IRS paying off the total amount due.

Don't forget that you'll owe interest, plus the "failure to pay" penalty of 0.5% per month, on the outstanding balance.

If you need more time to pay off the taxes that are due

One other alternative is to enter into an installment arrangement with the IRS. This is done by completing and filing a Form 9465, and attaching the completed Form 9465 to the front of your federal income tax return. On this installment request form, you tell the IRS how much you can afford to pay each month and the day of the month that the payment will be made. 

The IRS charges a fee of (around) $43 to any taxpayer who enters into an installment arrangement. In addition, the IRS will charge interest at 7% per month, and a "failure to pay" penalty of 0.5% per month on the outstanding balance. Plus, failure to make a scheduled payment will cause the remaining outstanding balance to become immediately due.

The Last Resort - The Offer in Compromise

If the amount you owe is so large that you can't pay it off through an installment plan, you're last resort is to enter into an "Offer in Compromise" with the IRS to try to get them to reduce the amount of taxes owed.  You can find information on Offers in Compromise on the IRS' website (www.irs.gov).

Always Submit Your Tax Return on Time

As you can see, if you owe money to the IRS, you can expect to be charged interest, plus a "failure to pay" penalty of 0.5% per month, on the amount owed. 

The penalty for not filing your tax returns, however, is a whopping 5% per month, up to a total of 25% of what's owed.  Since the failure to pay penalty is so much smaller that the failure to file penalty, always try to file all your tax returns on a timely basis, even if you're unable to pay the full amount of the taxes due at that time.


Check out our Directory of Affiliated Offices to find a CPA near you who specializes in the tax planning and preparation for young health care professionals.


When you have a toothache, you go to the dentist and when your pet is sick, you go to the veterinarian.  But where do you go if you need help with your personal finances?  More and more, people are turning to financial counselors to help them with their finances.

Just check the local yellow pages and you'll see that there's a plethora of financial counselors out there.  How can you find one that's right for you?  Start by asking your friends, family, and business colleagues the name of their financial counselor and whether they are happy with the advice they have received.  If you have a relationship with a CPA or an attorney, ask them for a recommendation as well.  Then, after gathering some names, meet with at least three different financial counselors to get a sense of how they work.

The ABC's of Financial Counselors

When deciding who to work with, you may be surprised by all the different initials financial counselors put after their name.  Certified Financial Planners (CFP) and CPAs with a Personal Financial Specialty (PFS) designation have passed comprehensive exams on all aspects of financial planning.  Financial counselors with either of these designations should be able to advise you on a wide range of issues pertaining to your personal finances.

If you're looking for help with your investments, you might consider working with a Registered Investment Advisor (RIA).  And if you'd prefer working with a professional licensed by the insurance industry, then look for either a Chartered Life Underwriter (CLU) or a Chartered Financial Consultant (ChFC). 

Even Financial Counselors Need to Eat

Nobody works for free.  Financial counselors earn their money by charging an hourly rate, receiving a commission by selling investments or insurance products, or by charging an annual fee based on assets under management.  Make sure that you understand how your financial counselor will be compensated and decide whether you are comfortable with that arrangement.

Do Your Due Diligence

Once you have narrowed your choice to one or two financial counselors, you need to do your due diligence.  First, ask for a handful of references and give those people a call.  Next, contact the better business bureau, your state attorney general's office, and the applicable state regulatory agencies to see if any complaints have been filed against this person.  If nothing pops up during your due diligence, and you are comfortable with how the financial counselor works and gets compensated, then set up an initial meeting to get the ball rolling.

Do-It-Yourselfers Need Not Despair

If you prefer to handle your own finances, the internet has made your job much easier.  Through the internet, you have access to an abundance of information on personal financial planning and research on stocks and mutual funds.  You can also set up an on-line brokerage account, where the fees to manage your portfolio are generally quite low.  All these on-line resources allow do-it-yourselfers to act as their own financial counselors.



Income Taxes

Saving and Investing




  • Personal income tax returns are due 4/15/02

  • Request for automatic extension, Form 4868, due 4/15/02

  • 1st Quarter estimates due 4/15/02

  • Due date for funding your 2001 Roth or Traditional IRA is 4/15/02

  • Due date for self-employed individuals to fund their retirement plans is 4/15/02

  • Self-employed individuals who need additional time to fund a retirement plan should file a Form 4868 with the IRS




If you're married, and you and your spouse Need some guidance, check out


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2000 & 2001 TAX FACTS

  • For 2001, the standard deduction for a single individual is $4,550 and for a married couple is $7,600. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes, real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.

  • For 2001, the personal exemption is $2,900. Individuals will claim a personal deduction for themselves, their spouse, and their dependents.
  • The maximum earnings subject to social security taxes has been increased to $84,900 in 2002 from $80,400 in 2001.
  • The standard mileage rate has been increased to $.365 per mile in 2002 from $.345 per mile during 2001.
  • The maximum annual contribution to a 401(k) plan or a 403(b) plan has been increased to $11,000 for 2002 from $10,500 in 2001.  And if you'll be 50 or older by December 31, 2002, you can contribute an extra $1,000 into your 401(k) or 403(b) account this year.

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