Tax tips as April 15 filing deadline looms
As tax day quickly approaches, FOX 13’s Craig Patrick shares what is new ahead of the April 15 deadline.
Fox – 13 News
The April 15 tax deadline is only days away now, and if you’re feeling like you could use just a little more time, take it.
Instead of filing a return by April 15, you can opt to file a short, less than one-page form for an automatic extension until Oct. 15 with no questions asked. You’ll basically need your name, address, Social Security number, estimated taxes owed or refunded. Importantly, the IRS reminds taxpayers “an extension to file is not an extension to pay taxes.”
If you owe taxes, you must send a payment to cover it or face penalties on the amount owed.
Only the filing gets an extension. “Taxes are still owed by April 15,” said Carl Breedlove, principal tax research analyst at H&R Block.
How to know when to file an extension?
If you discover you’re missing information you can’t get quickly.
“If you are missing information, you definitely want to file an extension to give you more time to gather that information,” said Yishai Kabaker, partner at Gursey Schneider LLP. “K-1s from third parties are some of the most common causes of missing information.”
How do you file for an extension?
The IRS offers the following guidance:
If you have no taxes due: Individuals, regardless of income, can use IRS Free File at IRS.gov/freefile to request an automatic six-month tax-filing extension.
Alternatively, taxpayers can file Form 4868, Application for Automatic Extension of Time to File. If they mail the form in, taxpayers must do so before April 15. Changes at the U.S. Postal System mean mail may take days to get postmarked and then be considered late by the IRS. If you’re short on time, go to the local post office and get a hand-stamped postmark or consider filing online.
If you owe money: Taxpayers can choose to submit an electronic payment and select Form 4868 or extension as the payment type. The IRS will count it as an extension automatically, and taxpayers won’t need to file Form 4868.
Note that disaster victims and some living abroad and military members in combat zones may have extra time to file.
What if I don’t file an extension?
Penalties start to accrue immediately after the taxes were due if you don’t file for an extension. Here’s a breakdown of how it can cost you.
The IRS willl charge a failure to file penalty if you don’t file a tax return on time. The penalty is 5% of the tax owed each month, or for part of a month, the return is late up to a maximum of 25%. If your return is more than 60 days late, there’s also a minimum penalty for late filing. The minimum penalty is the lesser of $525 this year or 100% of the tax owed.
Additionally, failure to pay the full amount owed will further boost your costs. The IRS charges 0.5% for each month, or part of a month, up to a maximum of 25%, of the unpaid tax from the due date of the return until the tax is paid in full. The penalty increases to 1% if the tax remains unpaid 10 days after the IRS issues a notice of intent to seize assets.
If that’s not bad enough, the IRS also charges interest on any balance due. The interest rate is determined quarterly by the federal short-term rate plus 3% and interest compounds daily. In the first three months of the year, the rate was 7%.
There is no penalty for filing late if you don’t owe money or are owed a refund, but the IRS encourages you to file as soon as possible. If you’re owed a refund, you can’t get it until you file.
How do you estimate your tax liability?
“Multiply the additional income by your marginal tax rate to start,” Kabaker said. “When in doubt, you may want to add some additional cushion to your payment to cover you for unknowns.”
What if I can’t pay the entire amount owed?
If you can’t afford to pay your tax bill in full by April 15, apply for a payment plan. Once you apply, the IRS will notify you almost immediately if you’re approved.
The IRS lists the different payment plan options you can choose from.
Don’t forget state tax deadlines
State taxes are also often due at the same time federal taxes are due. So if you file an extension for federal taxes, check the state tax deadline.
“Some states have their own extension forms and requirements, and some states provide an automatic extension or will rely on the federal extension,” Kabaker said. “Please know the rules for your state to determine whether you need to separately file an extension in your state.”
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
