April 4th, 2014
We’re getting close to April 15th. But maybe the months of January through March zoomed by faster than an Indy race car and you’re still in shock that your taxes aren’t even started, let alone ready to be submitted.
However (and it’s a big one), this only delays when you have to file the forms. It doesn’t delay you paying what you think you owe. An extension can help reduce your penalties if you cannot afford to pay in full by the deadline.
There are two basic penalties the IRS usually imposes: a late filing penalty of 5% per month on any tax due plus a late payment penalty of half a percent per month. If you file an extension and then file your return by the extended deadline of October 18th, you’ll avoid the 5% per month late filing penalty. If you file after October 15th, the late filing penalty won’t begin until October 15th which reduces the total penalty as well.
Individual taxpayers can file an extension using Form 4868. Extensions can also be filed online, which has the added benefit that you’ll get a confirmation code from the IRS that your extension was received.
Businesses request an extension using Form 7004.
So, if you have had taxes withheld, chances are you won’t have to send any additional money in. Look at your tax returns from previous years to see if you owed or were owed money back, and let that be your guide.
So if this year was an off year, give yourself some breathing room and file that extension. If you talk to a tax accountant in May, June or July, you’ll probably get a better rate since it’s their off season.
Let’s look at state taxes.
California gives you an automatic extension, and you don’t have to file a separate form.
Here’s what you should do if you can’t file by April 15, 2014:
It’s usually better to overpay the Franchise Tax Board than underpay. They don’t tend to be as understanding and forgiving as the IRS.
And the usual disclaimer applies. Talk with the IRS or FTB and a licensed tax professional to get the best advice for you and your situation.
We write this to let you know that you may have options. And we hope that you have a great weekend.