What Increases The Odds Of An Audit
Rumors and whispers aside, the IRS does a great job of releasing detailed statistics on every facet of taxation imaginable. For all individual tax returns in 2013, the IRS audited 1 out of 100 returns.
For the average salaried taxpayer earning less than $200,000 the odds of an audit are lower at 1 out of 250.
Factors that increase the chance of an audit are:
- Taking the Earned Income Tax Credit.
- Having business income.
- Earning over $200,000.
Taxpayers with income over $1,000,000, for example, have a 1 in 9 chance of being audited by the IRS. In 2013, IRS audits uncovered a total of $37 billion in tax underpayments. Filing a proper return will keep you from contributing to that sum of money.
The Benefits Of Filing Form 4868
So, here are the benefits of filing Form 4868. Its easy, you get more time to file, and the IRS doesnt expect an explanation. The extension for itself is pretty simple, there are only 9 steps to filing it. Look, here it is
Essentially, you will just need to know your basic information such as your Social Security Number and the tax liability that you owe for the tax year 2019.
The IRS doesnt expect you to provide them any long-winded explanation for why you would like to file your extension. As long as you complete your Form 4868 correctly and submit it to the IRS before the deadline of your Form 1040 , along with your tax payment, you are good to go.
In this situation with the IRS, no news is good news, you will only hear from the IRS if they reject your Form 4868. This is the drawback if you decide to paper file and mail your Form 4868. You will need to ensure enough time to mail your Form 4868 and correct and resubmit your extension if you receive notification that your Form has been rejected. This is where our next point comes in, there are great benefits of choosing to file your extension electronically.
Extension To File Your Tax Return
If you cant file your federal income tax return by the due date, you may be able to get a six-month extension from the Internal Revenue Service . This does not grant you more time to pay your taxes. To avoid possible penalties, estimate and pay the taxes you owe by the tax deadline of April 19, 2022, if you live in Maine or Massachusetts or April 18, 2022, for the rest of the country.
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An Extension Can Help Prevent Penalties And Protect Yourself
If you have even a doubt that you can file your taxes on time, its a good idea to go ahead and file an extension. Failure to pay on time results in a penalty from the IRS, where they charge you 5 percent of your tax balance plus interest for each month your balance remains unpaid.
If you file an extension, the tax penalty is only 0.5 percent per month plus interest. That costs you significantly less. Any tax that has not been paid by April 17 is subject to penalization.
While it can cost you if you are late to pay, there are still many benefits of filing a tax extension. As mentioned, even if you pay late, you generally pay less in penalties if you were granted an extension. With an extension, you are also giving yourself more time to complete your tax return accurately, which lessens your chances of being audited.
Filing Tax Extensions: Everything You Need To Know
- Publish date: May 7, 2021 2:30 PM EDT
If you need more time to file your taxes after this crazy past year and plan to file an extension, make sure you do so by the May 17 deadline or you will receive a late filing penalty.
Lisa Greene-Lewis, CPA and TurboTax expert, also explains that you will not receive a penalty for filing an extension, but you will receive a penalty if you don’t pay what you owe. It’s important that you pay the bill because there’s not an extension to pay, and it’s also important to file the extension on time because the failure to file penalty is greater than the failure to pay penalty.
Everything you need to know about filing an extension:
- You must fill out form 4868, but you can e-file it as an easier option so that it’s sent directly to the IRS electronically instead of mailing.
- The filed extension pushes the deadline from May 17 to Oct. 15.
- You need to put in some information so you know what taxes you owe or if you’re going to get a refund. There’s no penalty if you’re going to get a refund, but if you owe money then you’ll need to know that because the IRS wants you to pay at least 90% of what you owe to avoid receiving a penalty. It’s not a total freebie.
- Some states accept the federal extension and some states don’t, so it is on a state-by-state basis. Some states require you to fill out an extension for the state as well. Make sure to find out exactly what your specific state rules are for filing extensions.
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Why File A Tax Extension
Most people like to follow the rules and get things done on time. For some people its simply not possible to complete their tax returns by the April 15 deadline in spite of their best efforts.
For example, small business owners often have to wait for their business tax return to be completed before they can file their own personal tax return. The schedule K-1s from their partnership or S corporation may not be available by the regular tax filing deadline, thereby requiring the taxpayer to file for an extension.
Even your run of the mill salaried employee might not be able to meet with a tax preparer before the regular April due date. I often receive a revised 1099-DIV form for my brokerage account in the middle of March due to a single mutual fund I own. The mutual fund usually files their required tax forms in late February or early March.
My broker cant prepare an accurate 1099 for my account until they receive the tax information from the mutual fund. If I were to try to find a tax preparer in late March or early April, I may have difficulty getting my tax return prepared by the due date.
Heres Who Should Consider Filing A Tax Extension And How To Do It
- If you’re worried about the tax deadline, it may be time to consider filing an extension, experts say.
- You can do it online through IRS Free File, regardless of income, pushing your due date by six months to Oct. 17, 2022.
- However, you must file the request by April 18, and you still need to pay taxes owed to avoid late payment penalties.
If you still haven’t filed your taxes, you’re not alone. But if you’re worried about the April 18 deadline, it may be time to consider an extension, financial experts say.
Nearly one-third of Americans don’t file until the last minute, according to a report from IPX 1031, with many waiting because they don’t expect a refund or find the process “too stressful and complicated.”
Tax season has become increasingly complex, leaving professionals with more work, such as reconciling stimulus payments, advance child tax credits and other pandemic-related changes.
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What It Means To File A Federal Tax Return Extension
As the April 18 individual tax filing deadline approaches, you might be wondering: Should I file an extension? There are advantages to applying for an extension of time to file a federal tax return with the IRS, but it might not be the right thing to do in every case. Read on to learn about the factors you should take into consideration when determining whether an extension is right for you.
When you file for an extension, you are asking the IRS for an additional six months to file your tax return. For the 2016 tax year , an extension will extend the filing deadline for personal tax returns from April 18 to October 16. Businesses can also request an extension, which pushes the deadline to September 15.
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“Everything is taking two to three times longer than it should to get a return out the door,” said Matt Metras, an enrolled agent and cryptocurrency tax specialist at MDM Financial Services in Rochester, New York.
Moreover, many taxpayers didn’t receive Form 1099-B, which covers profits and losses from brokerage accounts, until early March, slashing their time to crunch the numbers, he said.
“I’m filing more extensions than I ever have in my entire career this year,” Metras added.
I’m filing more extensions than I ever have in my entire career this year.Matt Metrascryptocurrency tax specialist at MDM Financial Services
There are many reasons to consider a tax extension, said Elliot Herman, a certified financial planner and CPA with PRW Wealth Management in Quincy, Massachusetts.
For example, some filers have complicated situations, such as small businesses requiring more time, he said. And others may not receive all their tax forms such as Schedule K-1, which covers business income, deductions, credits and more by the deadline.
“There aren’t any major downsides,” Herman said, of extensions. However, you must file an extension by April 18, and you still need to pay taxes owed to avoid late payment penalties.
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How Do I Know My Tax Extension Request Has Been Approved
Extensions are pretty much automatically approved. Its rare for the IRS to reject a tax extension. Form 4868 doesnt even ask for a reason for your extension. So, my dog ate my W-2 or I was too busy binge-watching Netflix are all okay excuses as far as the IRS is concerned.
When you file your extension electronically, youll receive an electronic confirmation. Hang on to that! If you filed by mail, you probably wont receive a confirmation from the IRS. You can just assume your request was accepted. Or, if you dont mind waiting on hold for hours, you could try calling the IRS to see if they received your form.
You Can Deal With A Personal Matter
Sometimes life and taxes dont cooperate. Maybe youve had an illness, or there was a death in the family. Maybe youre going through a divorce or, for that matter, getting married. Maybe a natural disaster impaired your home. Maybe your business partner isnt working out the way youd hoped. Any of these, and more, could be reasons why youre unable to make your tax filing deadline. Filing for an extension allows you to delay the stress of filing your taxes and gives you the time you need to deal with personal matters in the meantime.
Submit Your Extension Request Form
You have a few options for filing your extension request and paying the tax due.
- Pay electronically. Most businesses must use the Electronic Federal Tax Payments System to make federal tax payments. This system allows you to schedule direct debits of tax payments from your business bank account. To use EFTPS, you have to enroll online or call EFTPS Customer Service at 800-555-4477 to request an enrollment form. If this is your first time using EFTPS, the IRS will validate your information by mailing a personal identification number to your IRS address of record. This process takes five to seven business days, so it’s not a good option for last-minute tax payments.
- E-file through your tax software or a tax professional. If you file Form 7004 electronically, you may be able to pay via electronic funds withdrawal. You’ll have to provide your business bank account’s routing and account number and sign Form 8878-A, IRS e-file Electronic Funds Withdrawal Authorization for Form 7004.
- Paper file Form 7004 and mail a check. You can also mail Form 7004 to the IRS along with a check for the tax you owe. The mailing address for sending Form 7004 depends on which tax form you use and your business’s state. See the IRS Instructions for Form 7004 for a list of mailing addresses. If you go this route, be sure to send your form and check via Certified mail, so you have proof it was mailed by the original tax filing deadline.
Reduce Your Tax Preparation Fees
Some accountants and even tax preparation software are free to raise their fees in the weeks leading up to the April deadline, only to drop them again during the slow spring and summer months.
Price-sensitive taxpayers can save money by shifting tax preparation to a time when their accountant is less busy and charging a lower fee.
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Take The Stress Off Your Shoulders
Life gets hectic. And even those who have every intention of filing early may find they are crunched for time. Maybe you had a major life event take place, got busy at work, or you just plain forgot about tax time until now. Whatever the reason, its reassuring to know you can easily file a tax extension to give yourself more time.
Trying to file at the last minute is not only stressful, but it can cause you to make mistakes that could have long-term financial implications. By giving yourself more time, you can ensure you claim every credit and deduction you are qualified for.
Filing a tax extension is easy and simple to do. Save yourself the headache and consider filing your extension before the tax deadline. Using a tax software such as TaxAct can make filing an extension even easier and can take away the stress of filing your taxes.
How To File For A Tax Extension
10 Min Read | Apr 21, 2022
So you got your W-2 and a few other statements in February and thought, Meh, Ill do my taxes later. Or maybe you put off doing your taxes because you were missing an important document. March flew by, and before you knew it, Tax Day was looming.
If thats you, you might need to file a tax extension. Not sure what that even means or how it works? Dont worry. Weve got the full scoop on everything you need to know about tax extensions.
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Victims In Fema Disaster Areas: Mail Your Request For An Extension Of Time To File
Need more time to prepare your federal tax return? This page provides information on how to apply for an extension of time to file. Please be aware that:
- An extension of time to file your return does not grant you any extension of time to pay your taxes.
- You should estimate and pay any owed taxes by your regular deadline to help avoid possible penalties.
- You must file your extension request no later than the regular due date of your return.
How To File For A Tax Extension With The Irs
If youre like millions of Americans, you might need more time to file your income taxes this year past the April 18th deadline. If so, you can request an extension with the Internal Revenue Service for six more months until Oct. 17, 2022.
Even if youve filed for an extension, you should pay any owed taxes to the IRS by the original April 18th deadline to avoid being penalized. Its important to remember that an extension to file is not an extension to pay your taxes taxes must be paid regardless.
The penalty for not filing a return by the deadline is 5 percent of the unpaid tax balance each month the tax return remains not filed. The failure to pay the penalty is much less, at 0.5 to 1 percent of the unpaid taxes, which makes filing for an extension a smart move if you need more time.
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How To Request A Tax Filing Extension
If youve considered the benefits and decided that requesting a tax filing extension is a good choice, the process is simple and straightforward.
The extension for tax filings can be found online. You simply complete the IRS Tax Form 4868 for personal tax returns or IRS Tax Form 7004 for business tax returns, and you can file your tax extension.
If you submit Form 4868 electronically, you will receive a confirmation code from the IRS indicating that its been received. Make sure you keep the deadline for filing in mind, however. You wont be able to request an extension once the deadline has passed.
Avoid The Hectic Tax Season
Having more time to file can improve the accuracy of your return. Accountants and taxpayers are both extremely busy during tax season, and it is possible for mistakes to be made. During the tax season rush, many accountants will be overwhelmed and may miss important deductions that could save you money. Filing for an extension can help you avoid the mad rush and will allow you to take your time and make sure your taxes are filed correctly.
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The Benefits Of Filing Form 4868 With Expressextension
How can you e-file? ExpressExtension offers a simple solution that will ease the burden for even the most inexperienced filer and provide the features that the most experienced filer will appreciate.
When you e-file your Form 4868 with ExpressExtension, we walk you through the process. Because we take an interview style approach, we will prompt you for the information that is needed for the Form 4868. This allows you to complete the form quickly and easily.
We also offer you peace of mind that you wont find with other providers. As an IRS Authorized E-file Provider, we are able to transmit your Form 4868 directly to the IRS. You will receive an immediate IRS update on the status of your extension.
Worried about getting rejected? If you do, not only will we tell you where the error lies but we will allow you to correct and retransmit your extension form at no additional charge.
There you have it, the Form 4868 may be a lifesaver for you this tax season! Get started filing today!