OH NO! April 15th is just around the corner and you haven't filed your income taxes!! Now what? Well, you can try and get them completed by the 15th, or you can file an extension. About now, you may be asking yourself - "Is it difficult to get an extension?
Well actually, the extension that you file for your individual return is called an Application for Automatic Extension of Time (form 4868). So as the name implies, it is “automatic.” There is one caveat. To file this extension you need to estimate
your tax liability for 2012 and report any payments you have already made. This would include the federal withholding shown on your W-2 and/or any federal tax estimates you made for the 2012 year. The form 4868 then leads you to calculate your balance due. However, take note of a common misconception. The extension is an extension to file your tax return only; it is NOT an extension to PAY the taxes owed with your return. Therefore, be prepared that if you owe taxes, you are required to send in a payment with the extension for the balance due.
your tax liability for 2012 and report any payments you have already made. This would include the federal withholding shown on your W-2 and/or any federal tax estimates you made for the 2012 year. The form 4868 then leads you to calculate your balance due. However, take note of a common misconception. The extension is an extension to file your tax return only; it is NOT an extension to PAY the taxes owed with your return. Therefore, be prepared that if you owe taxes, you are required to send in a payment with the extension for the balance due.
Actually, if you don’t owe any taxes, you don’t even need to file an extension. It’s true. You have until October 15th to timely file your tax return. As a matter of fact, if you don’t owe any taxes you may never need to file a return...but beware! If you think you don’t owe taxes and therefore do not file an extension, and later prepare your return (after April 15th) only to discover you do owe taxes, you will pay a penalty of 5% a month on the balance due from April 15th until it is paid. Ouch! However, if you filed an extension and then determine you owe more taxes, the penalty is only ½ of 1%. Quite a difference!
At MHC&S, it is our policy to file extensions for our clients even if they feel no additional taxes will be owed. An ounce of prevention can be worth a pound of cure!
And consider this…many times after you work through the calculations to determine your estimated tax liability, you may as well have gone ahead and prepared your return, as the time involved could be comparable. And just think – after sending it off to the IRS – well, that’s one more thing to mark off your list!! Feels good…doesn’t it?!
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