Implications Of Filing An Extension For Your Tax Return
Tick… tick… tick…
That’s the sound of the tax-filing clock winding down to April 15. What if you don’t think you’ll make the deadline? The consequences may not be as serious as you fear — if you take some simple steps before the deadline.
FILE AN EXTENSION
About 6 million people file tax extensions each year.
In past years, there were a couple of different applications you could file, but most recently there is just one. The extension is 6 months long, giving you until October 15th to file your taxes.
What’s most important, is that these extensions are meant to give you more time to FILE your taxes, not to pay them! When you request your extension, try to send an estimated payment along with it. If you don’t pay 100% of your taxes by April 15th, you WILL get hit with penalties and interest for the underpaid amount when you do finally file.This penalty can go up to 1% per month.
If you plan on making quarterly estimated tax payments for the following year, you should send in your first payment for the following year, along with your extimated taxes by April 15th. That way, you will have an overpayment on this years taxes, and can apply that over payment to the following years return, in place of your first quarterly payment. The benefit in doing this, is that it provides cushion against an underpayment penalty in case your estimate is too low.
IF YOU DON’T FILE AN EXTENSION
If you do not complete the steps above before April 15th, the IRS will penalize you 5% per month, up to 25%. They will also charge you interest.
IF YOU CAN’T PAY WHAT YOU OWE
The penalty for not filing at all, is much worse than filing and paying what you can. The penalty for not paying is only 0.5% each month until you pay it off.
Call me if you have any questions or wish to discuss your taxes further. I’d be happy to do so without any charge or obligation.