Bam! It’s April 15th and deadline day! What do you do? What DID you do?
If you’re one of the millions that filed for an extension you may have more time than you know. Since the 2006 filing year (in 2007) those that have extended their filing deadline have until October 15th to get their taxes into the government.
Here is what you should know about extensions:
What a lot of people don’t know is, if you OWE federal or state taxes (or both) your taxes are still due by April 15th – even if you file an extension. Regardless of your situation, Horizon Planning can help you assess your situation, help avoid penalties and give you peace of mind.
Want to know more an extension? We’ve put together a quick FAQ to help you understand more about filing an extension.
What is an extension?
A means of buying time to finish getting your taxes returns filed.
How much time am I buying?
FEDERAL – an extension gives you 6 more months to file. For most taxpayers that means October 15th.
CALIFORNIA – If you don’t anticipate a balance due to CA for your income taxes, you receive an automatic 6-month extension. If you expect to owe, your payment of the estimated balance due will count as your extension request.
OTHER STATES – Each state has their own rules. We can handle any state tax issues from our offices.
Will I be penalized?
Only if you have a balance due on completion of the return and you have not paid at least 90% of total tax liability by April 15th.
Will it trigger an audit?
An extension will not trigger an audit. What is in your return may require some additional explanations (a.k.a. audit), but not because of an extension being filed.
What if I need to make quarterly estimated tax payments?
An extension does not change the need to make quarterly payments on time (April 15, June 15, September 15 and January 15).
Can I still file electronically?
Yes, as long as the October 15th deadline is met.
What if I can’t pay what I owe?
Let’s assume you filed for an extension and later discovered owe a tax liability which you cannot pay. Once filed you can apply for a payment plan with the IRS or state revenue office. They will add penalties for late payment, a possible underpayment penalty and interest on the unpaid balance. The late filing penalty is the biggest and the one you want to avoid. FILE YOUR RETURN AS SOON AS POSSIBLE.
What are the penalties?
In both cases penalties and interest are calculated on the unpaid balance of your tax obligation. Penalties are “per month or part of a month.” (If you are willful or fraudulent in filing your taxes the penalties are higher and may include prison sentences.) These are the standard:
Failure to File or Late Filing penalty is 5% (max of 25%).
Failure to Pay or Late Payment penalty is 0.5% (max 25%).
Interest is 4% per year or 0.0109589% per day.
If you need help filing your taxes contact Horizon Planning. We’ve been preparing taxes for over 32 years. In addition to federal returns we can handle all states that require tax filing. Contact us now. We’re a click away from living your financial life as planned…not by chance.