It’s happened again. It’s a little over three weeks until Tax Day, and you’re nowhere near ready. Your files are still a mess, receipts and documents are scattered everywhere, and 1099s or W-2s need to be rounded up. What’s more, life keeps getting in the way. You can’t find time to pull everything together for your accountant.
Maybe you won’t worry about hitting the April 15 filing deadline this year. You’ll just be a little late. How bad can that be?
Answer? It could be very bad.
Solution: File an extension.
The IRS Expects Two Things
The IRS expects individual taxpayers to do two things every year:
- File a tax return by April 15
- Pay any taxes owed on April 15
Of course, things come up, and sometimes taxpayers aren’t ready when April 15 rolls around. In that case, you can file an extension, which gives you or your accountant extra time to get your tax return filed. But there’s a catch. The extension is only on filing the return. It doesn’t buy you additional time to pay taxes you owe. The IRS still expects you to send in your money on April 15.
How can you do that if you haven’t done your taxes yet? It’s a valid question. Most accountants can help you estimate the amount you’ll owe so you can at least send the IRS something. Sending something is better than sending nothing.
What Happens If You File Late?
If you owe the IRS money and don’t file your return by April 15, you’ll pay a penalty. And that penalty adds up quickly. For every month you don’t file your taxes, you pay an additional 5% of what you owe, up to 25%.
So, for example, if you owe $1,000 and don’t file your tax return until July 20, you’ll owe an extra $400 in penalties. And that’s if you went ahead and sent the IRS some of what you owed on April 15. To compound the problem, you’ll also owe interest on any unpaid taxes. So if you didn’t file because you couldn’t afford to pay your taxes…you’ve just made the problem a whole lot bigger.
Filing an Extension Buys Some Time
The IRS is more concerned about getting money than about receiving tax returns. But taxpayers do have to do both. Filing an extension gives you more time to get your tax documents together so your accountant can file your return. But someone has to file the extension to get that extra time. Remember, the extension only applies to filing your taxes, not paying them. The IRS expects to be paid on time, even if you file an extension.
Tax extensions must be filed by April 15, so if you know you won’t be ready to file your return by then, make sure you file an extension on or before that date.
What Happens If You’re Expecting a Refund?
If you’re expecting a refund this year, you’re not off the hook. You still need to file an extension by April 15 if you can’t get your tax return filed by then. If the IRS owes you money, they’ll simply sit on it until you file your return.
Need to File An Extension? Call Adams Accounting Solutions!
If you need extra time to gather your tax documents this year, give Adams Accounting Solutions a call so they can file an extension for you by April 15. That’ll give you a little breathing room while you gather your paperwork. And if you have questions about anything related to tax preparation, give us a call. We’re more than happy to help!
Richard Adams is a graduate of Benedictine College in Atchison, Kansas, with dual majors in Accounting and Business Administration. He is also a graduate of Wentworth Military Academy in Lexington, Missouri.