More than 30% of American taxpayers file their taxes last minute. Are you one of them? If you are, this is it- the last minute. Taxes are due by April 18th. Luckily, the IRS allows for an extension in some cases, but even that extension request is due by April 18th.
If just the thought of this is making you uneasy, reach out to us at Waters Hardy today. We are your tax pep lifeline. Specializing in tax planning and compliance, we are here to guarantee that you are fully informed and filing your taxes in a secure and smart way. Even if that means filing a tax extension this year.
What is a Tax Extension?
Simply put, a tax extension gives you six extra months to file your taxes. So, instead of having your tax return due on April 18th, you extend your due date to October 17th, 2022.
IMPORTANT – An extension does not buy you more time to pay your taxes. Filing an extension only helps you avoid big failure-to-file penalties. If you owe taxes, they’re due on Tax Day! So, if you don’t pay by Tax Day, you’ll rack up late-payment penalties and interest.
Who Should Consider Filing an Extension?
The extension is especially important only if you owe taxes and are not ready to file by the April 18th deadline. If you know that you’ll be getting a return from the IRS, then there is no urgency in filing your taxes by the deadline. You’re simply delaying getting your money back. Unfiled or unclaimed tax returns are acquired by the IRS after three years, so don’t forget about your taxes.
Reasons to File an Extension
Filing an extension should not be the first option to consider when filing your taxes. It was created to help people avoid some of the harsher penalties and late fees. It’s also an option for individuals who can’t meet their deadline for whatever reason. Here are a few examples of why someone would need to file for an extension.
1. You are missing some of the documents you need.
The effects of the pandemic are still rippling through every facet of our lives, even tax preparation. There are a lot of different documents that need to be reviewed and considered when filing taxes. Since things are working at post-pandemic speed, some of these documents are not getting to taxpayers on time.
2. You’ve gone through an unexpected life event this year.
If life has thrown you an unexpected curve ball and you’ve gone through a difficult situation, don’t add to your stress rushing to meet a deadline. File for an extension. It’s better to take your time and get your tax return right, rather than rush and end up having to amend your 2021 return later.
3. Your tax situation is especially complicated, and you just need more time.
- Tax preparation in the aftermath of the pandemic is considerably more complicated. Millions of Americans received the government’s stimulus payments, accelerated credits, and other economic-stimulating measures which does not make this easier.
- Itemizing tax deductions or owning a small business can make your tax filing really difficult. In that case, pushing the deadline to October can prevent you from speeding through your process and making mistakes.
How to File an Extension
You will need to file an extension using Form 4868 provided by the IRS. You can do this online through the IRS website, or you can print this form yourself and mail it in. The only way to avoid this form is to make a payment through IRS Direct Pay and choose “extension” from the online menu. Either way, to be considered, any extension request must be submitted by April 18th.
Tax Payments Still Due April 18th
The extension is only for filing your tax return – not for paying any tax you owe. You still have to estimate the amount of tax you owe (if any) and pay that amount by April 18th. If you don’t, the IRS will charge you interest on the unpaid balance and possibly tack on additional penalties for paying late. It’s important that you make a proper estimate of your tax for the year. You will be treated as not having filed a valid request for an extension if you do not make an accurate estimate of your tax. Therefore, you may be fined a penalty for late filing.
Why You Should File for an Extension
Avoid Penalty Fees
Failing to file an extension could cost you a pretty penny if you owe taxes. For every month (or partial month) you don’t file your return, you’ll pay an additional 5% of what you owe, up to 25%.
You owe $1,000, miss the April deadline, and don’t file an extension. You finally file your taxes on May 25. Your failure-to-file penalty would be $100 ($1,000 x 10%). You’ll also owe interest, currently 4% a year, on your bill.
If you file an extension because you can’t pay all of your tax bill, the late payment penalty is much less severe than the failure-to-file penalty. Instead of paying 5% every month, you’ll pay 0.5% per month, up to a maximum of 25%. You will, however, also pay 4% interest.
For instance, if you owe $1,000, but this time you file an extension, by May 25 your penalty would be $10 ($1,000 x 1%), plus interest.
Time to Get Organized and Decide
Even if you can’t pay a dime of your taxes by April 18th, you should still file an extension. The penalty for not filing your taxes is 10 times more severe than filing and paying late. The IRS is only going to charge your interest on the amount you owe that remains unpaid after April 18th. So, pay as much as you can, and if you still can’t afford to pay your bill after six months, look into setting up a payment plan with the IRS. If you can closely approximate your liability, you should pay it when it’s due. Even if you overpay, you’ll get your money back on any overage paid.
Waters Hardy for Your Last Minute Needs
You might find yourself avoiding April 18th because you consider the process too stressful or complicated. Professional accounting services, or more specifically, tax preparation services, require expertise and experience. You have a few days left to give the experts at Waters Hardy a chance to help you out.
What may take you days or weeks to do can take us far less time, and we guarantee it will be done right, the first time through. Maybe filing an extension is the smart move for you this year. Let’s work together and make filing your tax return in 2022 easy, fast, and reliable. Contact us today, for all of your last-minute needs!