If you filed for a tax extension in April, your tax forms need to be filed by October 15th. This is also the last day you can you can file to be eligible for the economic stimulus rebate (there are still over 5 million unclaimed economic stimulus checks). Taxes are normally due on April 15th every year, but taxpayers are eligible to file for an automatic extension if they need more time to prepare their tax return.
It is important to note that even if you file an extension, your taxes are due April 15th, whether or not your tax forms have been completed and filed. If you filed an automatic tax extension form, it is best to include any estimated taxes owed to avoid penalties and interest (as long as you send the IRS 90% of your actual tax obligation you will not owe late filing or late payment penalties). If you overpay, you will receive a refund.
How do tax extensions work?
Filing for an automatic 6 month extension to file your taxes is easy. Simply fill out Tax Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return by the tax filing deadline (usually every April 15). You then have until October 15th to file your taxes with the IRS. If you missed the deadline to file for an extension, get it in ASAP, which will minimize IRS penalties and interest owed. These penalties and fees can be substantial!
After you file your tax extension
Now comes the fun part - get your taxes done. There are many options such as doing them yourself by hand, paying someone to do them for you, or purchasing a software program such as TurboTax or TaxCut. The sooner you get them done the better, because if you owe more in taxes than you paid, you may owe late payment penalties. Having a deadline hanging over your head can also cause a lot of unnecessary stress.
Late filing and late payment penalties
If you didn’t file for an extension and still haven’t completed your taxes, do them ASAP! This will help minimize IRS penalties and interest owed. Remember, if you owed taxes, the money was due to the IRS by April 15th. Even if you can only send in a partial payment, that will help reduce the amount of penalties and interest you owe.
Late filing penalties are high. The IRS will assess a late filing penalty of 5% of the unpaid taxes not paid by the due date for each month your taxes are late, usually to a maximum of 25%. It is very easy for late filing penalties to to reach several hundred or several thousand dollars. If your payment is more than 60 days past due, the minimum late filing penalty is $100 or the balance of the taxes you owe, whichever is less.
Late payment penalties and interest are also assessed when you do not send the IRS your tax obligation by the tax deadline. The late payment penalty is usually 0.5% of your unpaid taxes, with the maximum also at 25%. You may be able to have your late payment penalty waived if you paid over 90% of your obligation, however, you would still owe interest on the balance due. The interest stops accruing when you pay the balance. Translation - pay your taxes ASAP to avoid large penalties and fees!
photo credit: woodsy.
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Informative article, well done.
It is estimated that 1/3 of middle to high income families file form 4868 and then wait until now to do anything about it until the first of October. I have often found this to be problematic as time passes they tend to lose, misplace, or forget some important tax information.
As a tax preparer I don’t usually recommend these people do their own but many do. In this case I recommend software (usually TurboTax).
In addition to the possibility of losing the paperwork, the extra fees can be killer! I guess there’s nothing like waiting until the last minute! I use TurboTax as well. It seems to meet my needs perfectly.