It gets busy around tax filing season and the tedious task of gathering files, receipts, reports and other needed documents, to file, gets pushed back to the last minute. As the tax filing deadline comes closer you wonder if filing an extension is possible.
There’s plenty of confusion when the time comes to file an extension on your taxes, but there doesn’t need to be. This year especially, there seemed to be a lot of confusion about extensions from clients, so I decided to share a few “hacks” with you this month. In fact, the hardest part of filing an extension isn’t having a reason, it is usually understanding that, despite the fact you’re return isn’t due, your payments still are.
That’s right – filing a tax extension still means that your taxes – at least an accurate estimate of them – will need to be paid by the “regular” due date for the taxes in question – personal, corporate, or business. If you don’t take that critical step, the IRS can invalidate your extension and really cause you some heartache.
The primary form used in filing an extension for a business entity is Form 7004 but individual returns will use Form 4868. Actually, there are a number of forms that may be applicable for specific situations. The good news is that even if you are still doing your own taxes, all of the major tax software applications have a system to help you file an extension. Depending on the suite you’re using, you can either use the “search” option or look in the tabs on your dashboard and see the “extension” option based on the type of return you’re dealing with. From there, simply follow the prompts and, in many cases, the IRS will not levy any charges for filing an extension – but remember, you still have the responsibility of the taxes owed, even though the return isn’t finished.
Of course, if you have a professional preparing your returns, we would handle these details for you and merely keep you apprised.
Here’s the best news when it comes to tax extensions – you don’t need a reason! Many times, though, Schedule K-1s, Form 1099s, and others take a little extra time to arrive and can cut your own business’ preparation time short, so an extension is the most practical way to handle filing deadlines. In other cases, an individual taxpayer may have personal challenges or simply not have made the time.
The main reason for filing an extension, though, is simply this: Taxes demand the utmost accuracy and, at times, that accuracy takes more time. A failure to adequately document your business or personal return can cost you thousands of dollars, so if you need the time, take the time.
The primary goal of any tax extension is to allow the taxpayer or entity to file an accurate return. As stated earlier, though, the amount due to the IRS is subject to being paid on March 15th or April 15th, not when the taxes are filed after the fact.
One solution is a short extension to pay, of 60 to 120 days; you will still pay penalties and interest, but at a lower rate. The IRS also offers installment agreements for taxpayers who can’t pay their taxes when they are due. This lets you pay a set amount per month until the tax is paid. Finally, the IRS suggests you consider paying your tax due with a credit card or loan. In many cases the interest on these accounts will be lower than the combined penalties and fees you’ll pay the IRS.
Filing a tax extension can be a practical way to reduce the stress of getting all your tax information collated and properly documented, but it is also important to realize that you cannot prolong the inevitable – you will have to pay what you owe and an extension will not stop that aspect of the tax filing process. Our advice? Keep your bookkeeping impeccable, have a professional preparer, and keep your financials up to date.
Discussions with a qualified accountant is always good advice to heed. But when thing get out of control and the IRS have sent threatening letters, notice of lien or threatening an asset seizure, it is time to contact a Tax Resolution firm who specializes in this work. Our Company does just that. When Payroll taxes are delinquent the IRS will become even more aggressive. You can always call me @ Patrick LeClaire 407-287-6638 and we can review your case. If you are an avid reader then my E-Book “Trust Fund Penalty” is a comprehensive discussion of what you can expect and what you can do to mitigate. Free of charge so: