April 17th is almost upon us. Yes, that’s right. We said April SEVENTEENTH. It’s not a typo—this year April 15th, the usual tax-return deadline, is on a Sunday, and there’s a holiday in the District of Columbia on Monday the 16th. You can thank Emancipation Day for your extra few days to file your taxes.
But no matter if it’s the 15th or the 17th, this deadline is the day that many dread, but most are relieved to find that they come out unscathed. The truth is, if you need to file a tax extension then there is no shame in doing so—in fact, statistics show that 30-40% of Americans file for a tax extension every year. Their reasons may differ, but if you notify the IRS within the allotted time then there should not be any problems.
However, filing for a tax extension does not mean you get a free ride when April 17th comes around. In fact, to qualify for an extension you must have paid the majority of your tax liability for that applicable year. Not sure what that means? It means that if you have not paid more than 10% of your total tax liability, or $1,000, then you will be charged with fees and penalties in addition to the current interest rate.
On the other hand, if you have all your required payments in order, then you would need to inform the IRS of your tax extension request by filling out a Form 4868, known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This will provide the IRS with the data needed to process your request so that you only need to pay interest instead of charges and additional fees. Note that the added six months also gives you time to re-purpose your money from a traditional IRA to a Roth account. Self-employed business owners also get the added bonus of being able to fund retirement accounts right up to the extension’s due date.
So whatever the reason, be sure to file a tax extension if you know you are going to need the extra time. It can provide a safe cushion for your business during a down year, or give you the time you need to recover from an unexpected event, such as the sudden death of a loved one. No matter what the reason, Simons Accountancy is here to assist you with your every question, concern, as well as provide professional advice for any tax-related inquiry. Call now to have your taxes reviewed and get an extension filed for you: (714) 637-4552