With the April 18th personal tax return deadline just a few weeks away, the task of trying to get all of your information together in time may feel overwhelming or perhaps impossible. Fortunately, the IRS allows taxpayers to request a six-month filing extension, providing the request is received by the original filing deadline. However, while this may seem like a “get out of jail free” card, there are several important things you need to know!
Federal Tax Extensions
- Pay your taxes on time. An extension will provide extra time to get your paperwork to the IRS, but does not extend the time you have to pay any tax due. In addition, you will owe interest on any amount not paid by the deadline, including possible penalties. However, taxpayers who are having trouble paying what they owe may qualify for payment plans and other relief.
- File your extension by the deadline. Although an extension may be granted until October 16th in 2017, the last date to file an extension remains April 18th. Failing to file by this date will incur penalties for late filing which are 5 percent of the unpaid taxes (for each month the payment is late) to a maximum of 25 percent.
- Provide accurate information. The IRS generally approves of all extensions, no matter what the reason. However, incorrect or incomplete information could result in the IRS disapproving your plea to extend. Therefore, it’s critical you provide accurate data in your extension request.
State Tax Extensions
While the IRS requires you file Form 4868 to request a tax extension, each state has its own requirements for obtaining a similar extension. Some states such as California offer automatic extensions to all taxpayers (as long as you pay whatever money you might owe by April 18th), while other states require you to file a specific form by the original due date of the return. Here are some tips to help walk you through what you need to do when filing state taxes in your area:
- Check-in with your state tax authority. Some states including Wisconsin, Alabama and California offer automatic six-month extensions to file your state income tax return without having to file any additional forms. Other states, such as New York, will grant you a six-month extension but you must request it. For the nine states that do not impose a state income tax, you don’t even have to file an income tax return, let alone request an extension. Reach out to your state tax authority to confirm which steps you will need to follow.
- File the appropriate state tax form. Unlike IRS Form 4868, which applies to all taxpayers throughout the country, you must file the correct state-specific form to obtain an extension.
- Pay any estimated taxes by the original due date of the return. An extension of time to file your state income tax return does not also mean an extension to pay taxes you may owe. If you end up owing tax, you may be subject to late-payment penalties if you had failed to submit full payment of all tax due by the original tax deadline. To avoid paying any penalties, it’s a good idea to calculate a quick estimate of what you might owe and submit a payment. Even if you overpay, you can always claim a refund in a few months when you eventually file your state tax return.
Article source: Truax Tax Advisors