Facts About Filing For A Tax Extension
- June 28, 2019
- Posted by: asal
- Category: Tax Resolution
Do you need more time to file your taxes? If you didn’t file your taxes on time, you can request an extension. The IRS allows taxpayers to file for extensions if won’t be able to complete their tax return on time. However, a tax extension doesn’t completely wipe you of your tax responsibility. You still have to file your taxes, but this time you don’t have as much time to do it. There is no need to worry about becoming the target of an audit. Filing a tax extension will not set off red flags for the IRS.
What’s the difference between late payment vs. late filing?
First, it’s important to note there’s a difference between filing late and paying late.
Failure to file your taxes
If you file your income taxes after the deadline and don’t file an extension, the IRS will charge a penalty. The IRS will charge a percentage of your unpaid taxes per month up to a quarter of your total balance. After more than 60 days after the deadline, you may owe up to 100 percent of your unpaid tax. What does this mean? You will pay nearly double your taxes.
Failure to pay your taxes
Even if you file for an extension, you still must pay your taxes on time. If you don’t pay your taxes on time, the IRS charges 0.5 percent of your unpaid taxes per month. The max amount of percentage the IRS can charge on payable taxes is 25 percent.
Interest on unpaid taxes
You will also be required to pay interest on due taxes and the penalties listed above. Interest accrues at 5 percent annually on payable taxes and compounds daily.
If you do not owe taxes or are receiving a refund, there is no penalty for filing late. The IRS charges penalties and interest to those who owe them money. If you don’t file a return voluntarily and you owe taxes, the IRS will automatically file a substitute for you. However, you may not get the deductions and exemptions you’re entitled to receive.
Why should I file an extension?
Don’t be embarrassed to file an extension on your taxes. Life happens, and things get in the way, and the tax deadline always sneaks up on us. It’s possible you may need extra time to file taxes for several reasons.
Reasons for filing a tax extension
There are several reasons for filing a tax extension. We explain some of these reasons below.
Your tax preparation professional won’t have your return done in time. Make sure to ask your tax professional to file an extension and provide you an estimate of taxes you’ll owe.
If you think you’ll receive a corrected Form 1099 with a revised amount for qualified dividends and foreign taxes.
You buy or sell a home, change jobs, start a business, or exercise stock options. If those activities won’t be done in time, file for an extension.
If you receive income reported on Form K-1, you may not receive it in time for tax day.
You need to gather receipts for individual tax credits.
Rushing completion of your return impacts its accuracy.
Additional reasons for filing a tax extension
You may also file a tax extension to preserve tax refunds the IRS may owe you. You have three years from the original deadline to file for a refund.
Additionally, you can file an extension to gain more time to fund SEP-IRAs, solo 401(k)s, or SIMPLE-IRA plans. You can also submit an extension to protect your social security benefits if you’re self-employed.
Filing an extension can also gain you more time to make specific determinations about deductions and credits.
In essence, if you know your return won’t be ready by the deadline, file an extension by Tax Day.
What forms do you use to file an extension?
Taxpayers can use Form 4868 to file for an extension. The IRS allows six months after the original deadline to submit an extension. For example, if the deadline was April 15, your extension will be until October 15 of the same year. You cannot ask for an additional extension on top of your extension. If you owe state income taxes, check with your state tax office to determine if a separate extension is necessary.
What to do during your six-month tax extension
Once you file a tax extension, pay as much as your taxes as possible. The late filing extension doesn’t give you clearance to also pay your taxes late. If you don’t know how much you owe, make your best estimate. Make sure you pay it by Tax Day to avoid penalties and interest.
You should also do the following during your extension:
– Complete as much of your return as possible
– Start a checklist of missing items
– Mark estimated amounts on the return
– Check your tax receipts and other documentation off the list and organize your documents
– Make notes on credit card receipts and statements
– Add estimated payments made during the extension request period
– Complete an accurate return as soon as possible
Stay organized while filing for a tax extension
It’s essential to keep everything organized and ready to go. If you do this, when you file your tax return, you will be prepared. You don’t want to have to start every time you go back to finish your return.
Can an extension be rejected?
Yes, the IRS can reject your tax return. Here are the reasons why the IRS can deny your tax return:
– There are errors on the form, such as misspelled names
– The information is out of date. Make sure you have the current addresses and last names listed
Additionally, use this time to gather and organize your documentation. Make sure you double-check your return for errors and make decisions about deductions and credits. Be sure to pay your taxes by the deadline, even if you file for an extension. If you can’t pay the full amount, contact Platinum Tax Defenders. Our staff can help you file an extension and also determine tax relief options for you.
Get Help From A Tax Relief Professional
Hiring a tax relief specialist can get you a better deal when attempting to get tax relief from tax penalties. Platinum Tax Defenders can also help you apply for an extension for your tax returns. A tax attorney can help you determine which tax relief solution is right for you. The tax resolution specialist can also negotiate with the IRS on your behalf and submit the necessary paperwork. Owing tax penalties can leave you in bad financial shape. The IRS only wants to get what money you owe them in penalties. Often, they are willing to help you get tax relief from penalties, but you have to know how to try. That’s where a tax relief services company can come in handy. When you hire a tax resolution professional, there are other methods you can use to avoid costly tax penalties. Call Platinum Tax Defenders for a free consultation today.