Most people will file their 2021 taxes by the April 15 deadline, but what happens if you’re unable to file on time? Is there anything you can do to keep yourself in good standing with the IRS?
The answer is yes.
If you or someone you know needs additional time to file a federal tax return, you can ask the IRS for an extension. When you file an extension, you’ll be given additional time to file your return, and your deadline will be pushed out to October 15. According to the IRS, to receive an extension, you’ll need to estimate your tax liability (and you’ll need to pay the amount that’s due by April 15.)
Remember, just because you’re granted a tax filing extension, that doesn’t mean you’ll get an extension of time to pay your taxes. If you suspect you’ll owe the IRS money, you’ll need to pay by April 15. If you fail to pay what’s owed by April 15, you could face additional fines and penalties. If you can’t pay the amount in full, you should plan to pay as much as you can. Late payment penalties, according to the IRS, are calculated at 0.5% of what’s owed, per month. The IRS also notes that the maximum late penalty you can face is 25%.
For example, if you owe the IRS $12,000, you’ll be charged $60 in penalties per month, and the maximum late payment penalty you’d face is $3,000. You’ll also want to keep in mind that the late payment penalty is separate from any interest you’d need to pay on your unpaid taxes. For more information on how interest on unpaid taxes is assessed, be sure to talk to a tax professional.
Filing for a tax extension is easy, and the IRS notes that individual tax filers can do that themselves, via the Free File portal on their website. On the other hand, if you’re working with a CPA or other type of qualified tax professional, your tax professional can file the form for you.
If your request for an extension is rejected, it’s likely the request contained one or more errors. Examples of common errors include misspellings of names or street names, incorrect addresses, and/or last names that don’t match what the IRS has on file.
For more information on the pros and cons of asking for a tax filing extension, we can help. Call the office of Hughes, Snell and Co., PA to schedule a free, no-cost consultation. What are you waiting for? Call our office today to get started.