Applying for a tax extension may have nothing to do with Clint Eastwood, or an old western movie, but a clear understanding of what an extension does and doesn’t do, can help you avoid being charged interest (the bad) and penalties (the ugly).
The easiest and best way to make this decision is to talk with a Certified Public Accountant (CPA). They are familiar with current tax laws and can easily apply them to your situation and needs in order to recommend the best path.
In order to get a grip on what options you have, and what you’ll want to avoid, put down your pen for a minute and consider a few things.
Applying is Easy
Applying for a tax extension is easy and can be done online or by mailing form 4868 to the Internal Revenue Service (IRS). Check the address for mailing carefully as there are different ones, and yours is based on where you live.
Whether your reason for asking for an extension is due to travel, hardship, or other reasons, the request is almost always granted to any taxpayer that asks for one. The application is free, and when granted, extends the tax return deadline to Oct. 15, 2018.
An Extension Does Not Extend the Date for Paying, If You Owe
The tax extension DOES NOT change the deadline for payment of taxes. If you are thinking about the extension because you know you’ll have to pay and just want to put it off, don’t. The IRS has been onto that game for a long time, and they make you pay more if you try to play that way.
The IRS charges interest of five percent, compounded daily, and a late payment penalty of half-of-one percent for those who file a return on time or get an extension and don’t pay what they owe. Interest on the penalty is compounded daily as well. Also, claiming you didn’t know you would owe is not an excuse the IRS accepts. They ask you to estimate how much you will owe on the extension application.
The penalty charged for failing to file a return, or an extension, is 10 times more severe than filing and failing to pay. Those who fall into this category are charged five percent interest on what they owe, as well as a penalty of five percent. Interest on both are compounded daily. The IRS can increase penalties up to a maximum of 25 percent.
We Can Help Explore Options
Taxes, extensions, interest, penalties and all the decisions to be made can be not only confusing, but overwhelming. For instance, in cases where hardship can be proven, you may not be charged penalties for late payment, but what does it take to prove that?
At Klein Hall CPAs, we can explain all your options, help file all forms required by the IRS, and take the complex and turn them into the understandable for you. We will also stand by your side should the IRS have questions.
Working with an experienced CPA can save you money and turn your headache into a smile. To learn more, contact Klein Hall CPAs.