What To Know About Filing Tax Extensions

what-to-know-about-filing-tax-extensions

Going to be late filing your personal or business tax return this year? Maybe you had an illness or family emergency. Maybe you don’t have all the documentation you need, or maybe your business is going through a transition that caused you to be late in getting your numbers together.

No matter your reason, if you know you’re not going to make the tax filing deadline, you should file to request an extension. Filing for an extension is much preferable to not filing at all. Here’s what you need to know about filing to request a tax extension.

How Do You File For an Extension?

This year’s federal tax filing deadline for individuals, proprietorships, single-member LLCs and corporations (with December 31 fiscal year-ends) is April 17, 2018. You get a couple of extra days because April 15 falls on a Sunday, and there’s a District of Columbia holiday on Monday, April 16. Note: Tax returns and extension requests for multiple-member LLCs, partnerships, and S corporations were all due on March 15, 2018.

You file for a personal income tax extension (including sole proprietorships and single-member LLCs) by submitting IRS Tax Form 4868 by the tax filing deadline. Corporate income tax extensions can be requested using IRS Tax Form 7004. An extension gives you up to six extra months to file your personal or corporate tax return.

What If I Owe Taxes?

The IRS wants you to pay all tax due by the original tax filing deadline, even if you’re filing for an extension. If you can’t calculate your tax due by the deadline, you should consider estimating your tax due and submitting that amount. If you overpay, you’ll get a refund.

If you file to request an extension but don’t pay all tax owed by the original filing deadline, you’ll be subject to a failure-to-pay penalty. The IRS collects one-half percent each month on the amount of tax you still owe after the deadline, up to a maximum of 25 percent.

One way you can avoid the failure-to-pay penalty is to make a tax payment with your credit or debit card before the filing deadline. You may also be eligible for relief from penalties if you meet certain conditions.

What If I Don’t File For an Extension?

If you owe tax and don’t file either a return or an extension request, the IRS charges you a penalty of 5 percent per month (0.5 percent for failure to pay and 4.5 percent for failure to file) on all tax due, for up to five months. If you still haven’t paid by then, the IRS continues to assess the 0.5 percent failure-to-pay penalty each month thereafter. The maximum total penalty for failure to file and pay is 47.5 percent (22.5 percent late filing and 25 percent late payment) of the tax due.

Can My Accountant Help?

An accountant can help you prepare your tax forms, including filing to request an extension if you know you’re going to be late. Make an appointment as early as possible, and give your accountant plenty of time to properly prepare your returns.

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