Tomorrow is Tuesday, April 17th, 2018, which is a prominent date here in America, as your personal income taxes are due!
What if you haven’t filed your taxes yet? You need to file for an extension as soon as possible. An extension allows you six additional months to complete your tax return, making it due October 15th. Although an extension buys you time to actually file your tax return, it doesn’t give you extra time to pay your taxes.
You still need to pay your taxes due or else you will face a penalty. The penalty is ½ of 1% of any tax due per month, with a maximum penalty of 25%.
Sometimes having to file a tax extension is out of procrastination on your part, but other times you have a legitimate reason for not getting your return completed on time. The most common reasons for having to file a tax return extension include:
You received incorrect W-2 or 1099 forms and haven’t received corrected paperwork yet.
You are a business owner and have not received the K-1 reflecting your portion of business-related income.
You have an overly complex tax return due to business ownership or investments and need special attention from your accountant to file accurately.
Now that you’ve decided that you will be filing an extension, there are just a few steps you will need to take. Whether you use online tax software to file your taxes yourself or you work with an accountant, you need to complete Form 4868 - Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. On this form, you need to enter your Identification Information and Individual Income Tax Information. The second part includes areas to enter your estimated tax liability for the previous year, total payments already made, balance due, and the amount you are paying today.
As mentioned previously, you will be penalized on any unpaid taxes, so making an accurate estimated payment will help reduce any potential penalty. For example, let’s say you estimate a total tax liability of $15,000 in 2017. You have already made $10,000 in payments throughout 2017. Your “balance due” today is $5,000. If it turns out your actual liability was $16,000 when you complete your tax return, you will only be penalized on the $1,000 under payment. On the other side, if your actual liability was $14,000, you will receive a refund of $1,000.
The clock is ticking, get your tax return extension filed by tomorrow to buy yourself some extra time.