7 Facts about Income Tax Extensions

Not sure you’ll be prepared to file and pay your total taxes due by April 15? Here’s what you need to know about filing an extension.

Sometimes, things beyond your control keep you from making that April 15 income tax filing deadline. Family emergencies. Too much time traveling for work. An overly complicated financial situation. Missing – required – forms from third parties.

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Even though tax filing season is 2-1/2 months long, sometimes you’re just not ready. The IRS makes allowances for this by offering a six-month extension period. If you think you’re going to miss  that mid-April milestone for the 2013 tax year, you should know that:

Anyone can file for an extension. If you’re a U.S.taxpayer, you’re eligible to file for what the IRS calls an “automatic” extension. The agency does not require an explanation for your request.
 

 The IRS still wants you to pay your anticipated tax obligation by April 15.  

As the agency states on the required form, Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes.

Does this mean that you absolutely must submit all of the money owed by April 15? Again, in the words of the Internal Revenue Service, Your extension will be automatically processed when you pay part or all of your estimated income tax electronically.

We recommend that you pay all of what you anticipate owing if at all possible, but at least submit as much as you possibly can.TaxTips0314image2_zps4f2a2149

The IRS charges interest on late payments made via an extension. You’ll pay interest on any unpaid tax amount until you pay in full.

The IRS will assess a late payment penalty for every month or part of a month past April 15, 2014 that total tax remains unpaid. Generally, the charge runs one-half to one percent of your taxes due (except for any estimated tax you paid). Max is 25 percent.

You can ask that the late payment penalty be waived because of your circumstances. If you think that you have a good reason for the penalty to be excused, attach a written explanation to your 1040 when you submit it. In order to be considered for penalty forgiveness, the IRS requires that you’ve paid at least 90 percent of your 2013 tax liability by April 15, 2014. These funds can come in through withholding or estimated payments, and/or they can accompany the Form 4868.

You may also be given a penalty for filing late. Late filing penalties are usually charged when a return is filed after the due date (including extensions). The IRS normally calculates it as 5 percent of the amount owed for every full or TaxTips0314image3_zpsf8ce103bpartial month. Max is 25 percent. Here, too, the IRS may waive the fee if you attach a statement explaining the reason for your tardiness.

There are three ways to file a Form 4868 (the form required when you request an extension). You can:

1. File the Form 4868 using the Electronic Federal Tax Payment System (EFTPS), and submit the entire amount due or a portion of it. You can also use a credit or debit card.

2. E-file the Form 4868, or

3. Use the official IRS Form 4868 paper form.

Sometimes, a late tax return is unavoidable, and it’s worth paying the extra fees to make sure that your return is correct. But if you find yourself making a practice of filing extensions because you either wait too long to pull together your financial documents or you can’t pay the full amount on time given the amount of your obligation, talk to us about year-round tax planning. April 15 doesn’t have to be a day to dread.

 

 

 

 

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
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