“God put me on this earth to accomplish a certain number of things and right now, I am so far behind I shall never die.” -unknown
EXTENSIONS: WHAT YOU NEED TO KNOW!!
What does an extension do?
An extension gives you until October 15th to file without paying a penalty for late filing. This penalty only applies if you owe, and it does not give you an extension on paying. Payment is still due by April 15th. If it turns out that you do owe, and did not prepay your taxes, you will incur a late payment interest/penalty but it pales when compared to the late filing penalty. It costs you nothing and is the safe play.
Do I have to extend if I know I am getting refunds in the federal and all the states I file in?
To be honest: No. If you do not owe anyone, why should they worry? After all, they get to keep all your lovely money! You can only get it back if you file. And after 3 years, it is theirs for keeps. (Exception is VT – they take $50 out of your refund if you do not file or do an extension.)
How do the state extensions function?
Each state has its own individual quirks but basically follow the IRS pattern. The failure to file penalty is generally larger and easier to avoid by just sending in an extension.
How do I find out about my individual state requirements?
Google. But that is also what we are here for. If your state requires an extension, we will send it in for you if we have your information inhouse for each state you worked in. 😀
I usually get a federal refund, but owe my home state, should I be concerned with sending in an estimated payment by the tax deadline?
We can only answer this based on what most of our clients do. Most will file the extension to avoid the larger penalty, but not sweat the smaller stuff of the failure to pay penalty. For most clients, these individual state penalties average $20-60 but can be as high as $100 or more.
What is the IRS Failure to File penalty?
This is the penalty for not filing your return by the due date (May 17th, 2021 or October 15th with an extension filed). It is only applied if there is a balance due on your return. The penalty is 5% on the balance that you still owe, calculated per month, but maxed at 25%.
What is the IRS Late Payment penalty?
Think of this as a late payment fee. It is a penalty ranging from ½ to 1% of your unpaid taxes, calculated monthly. It is also maxed out at 25%.
Why do I pay interest on top of the late payment fee?
There are a few variables that take too long to explain here, but basically: The governments expect their money to be sent to them throughout the year (by quarterly estimated payments or paycheck withholding). When you don’t pay on time, the government is loaning you the money, so you get to pay the interest. Penalties are imposed to encourage compliance.
Better to do your taxes late and right, rather than in a rush and wrong. There is another advantage to extensions. You get to talk with us after the tax deadline when we have more time to answer all your questions, not just the 30 minutes we allow for before the tax deadline.
We do hundreds of extensions each year, so you are not alone. Many of our clients travel or are from other countries, gathering all the documents is difficult. After tax season, we will take a day or two break, and then pick up where we left off. Those who send in their completed workbook and other information will be put in a queue and kept in order, so still send us your information ASAP.
Basic Extensions are FREE!
Our extension policy:
If you have all your forms uploaded to our office by April 30th, 2021 (and we are unable to fit you in for a tax consult before the tax deadline) we will do a basic extension for you.
PA, OH, MI, IN, NY & MO state residents: We do not file municipal extensions. Please check with your local taxing authority to see what you need to do. If you need a copy of the Federal 4868, email us, and we will forward it to you.