Tag: Extension

Posted on by Jan Roberg

Filing an Extension for Your Personal Taxes

To the finish

Photo by david.ian.roberts on Flickr.com

Are you late filing your taxes this year? You’re not alone. It seems that many people are behind.

 

It’s important to know that an extension gives you an extension of time to file your tax return; it’s not an extension of time to pay your taxes. I think a lot of people want to file extensions because they owe and they think it will give them more time to pay. It doesn’t.

 

The penalty for paying late is ½ of 1% per month. So, let’s say that you owe $10,000 on your taxes. You file an extension, but don’t pay anything towards what you owe. When you actually file and pay in October, instead of owing $1000, you’re going to owe an extra $300. (.005 times $10,000 times 6 months = 300)

 

No matter what, if you’re not ready to file your taxes before April 15th, do file an extension. Although the late payment penalty is ½ of 1% per month, the penalty for not filing (or filing an extension) is 5% per month. That’s ten times as much as the late payment penalty. You don’t want to have to pay that.

 

If you need to file an extension—that is, ask for more time to file your taxes, here are three ways to do it:

 

1. File electronically, using tax software. If you don’t have tax software already, you can use the 1040.com software on this website. Here’s a link: Do Your Own Taxes

 

2. You can mail in a paper copy of the extension form. It’s called a 4868. Here’s a link: IRS Extension Form

 

3. You can make a payment towards your taxes with a credit or a debit card. And that will give you an automatic extension for your taxes. If you just want to make a payment, it’s pretty easy. You’ll start at the IRS website, and chose your payment provider from there. Here’s the link:  IRS Direct Pay

 

So if you can’t get those taxes done before filing time, do get that extension filed.  If you owe the IRS, it could save you some money!

 

 

 

 

 

 

 

Posted on by Jan Roberg

How to File an Extension for Your Sub-Chapter S Corporation

Form 7004

Sub-Chapter S Corporation tax returns (1120S) are due on March 15th. Are you done yet? If not, you might need to file for an extension. Here’s how:

First, make sure you really are a Sub-S Corp. I know that sounds silly, but every year (really, every year) I run into someone who thinks they have a Sub-S Corporation and doesn’t. It’s really important not to file paperwork for an entity that you’re not. If you’re an LLC that wants to be a Sub-S and you’re filing a “Whoopsie, I forgot to do the right paperwork clause,” you can’t file an extension, you’ve got to get your stuff in by March 15th.

But if you’re already a Sub-S corporation, then you can file for an extension if you need to. What you want is Form 7004. Here’s a link to it: http://www.irs.gov/pub/irs-pdf/f7004.pdf.

It’s easiest to just file it online and be done with it. But if you don’t have access to the software, you can paper file. Here’s the official list of mailing addresses: http://www.irs.gov/file/article/0,,id=177836,00.html . Basically, if you’re east of the Mississippi you’ll mail it to:

Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45999-0045

If you’re west of the Mississippi it will go to:

Ogden, UT 84201-0045

For some reason Florida and Louisiana are listed with the “west of the Mississippi states.” Anyway, Florida and Louisiana get mailed to Ogden. Also, any Sub-S with income of over $10 million sends its extension to Ogden no matter where the business is located. (Any Sub-S with income of over $10 million should have an accountant that can file the extension for them and you shouldn’t be reading a how-to blog about it. Seriously.)

You’ll have to check with your state to determine if you are required to file a separate extension for your state. Here in Missouri, your federal extension will serve as your state extension – you’ll just attach a copy of your Federal 7004 to your Missouri 1120S when you file it. You only need to file a MO 7004 if you have a franchise tax liability.

Why should you care about filing an extension? Money! If you don’t owe any money on your tax return, the penalty for filing late is $195 for each month (or part of a month) that the return is late, multiplied by the number of shareholders. So let’s say you and a buddy have a Sub-S corporation and you forget about the March 15th deadline and file on April 15th instead. You’ll owe a $390 penalty on a tax return with no balance due. That stinks. Of course, if you totally blow things off and file in August, the penalty will be $1,560 – on a tax return with a zero balance due! See why it’s important to file that extension?

Sub S corporations generally don’t pay tax with their corporate form, but if you do owe money for some reason the penalties are even higher.

Even though extensions are fairly simple forms, you still might not want to do it yourself. This is one form that Roberg Tax Solutions can prepare for you over the phone for $25. You’ll need your business name, address, EIN number and a credit card and we can do it while you’re on the phone with us. It’s that easy. You have no reason not to get your extension in on time.

Posted on by Jan Roberg

Why You Don’t Want to File Your Taxes on April 15th (Or the 14th for that matter)

taxation with representation

Photograph by Dayna Bateman

Does this sound like you?  You’re pretty sure that you owe taxes this year so you’ve had no motivation to get them done.  You know you have until April 15th so all through February and March you’re not even thinking about it.  April 1st rolls around and now it’s like, “Oh yeah, I’ve got to get that done.”  But life gets in the way and the next thing you know, it’s April 14th and you’re starting to panic.  You go online to do your return and realize that you’ve got some funky tax issue that you can’t handle by yourself so you need professional help.  You head down to the big box tax store and wait in line with 20 other folks who are in the same boat as you.

Don’t do that!

Don’t do your taxes on April 14th.  (Okay, for 2011 the tax deadline is April 18th, but everybody knows the 15th is tax day even if the IRS likes to mess with us about that.)  But that’s just another good reason not to file your taxes on the 14th because you have until the 18th this year.

But it’s more than that.  More mistakes get made on tax returns on April 14th than any other day of the year.  This isn’t a statistical fact, it’s just my observation.  I do audit work helping people who have tax trouble.  I notice that tax returns done on April 14th have more mistakes.  Not necessarily big mistakes, but missed deductions and credits.     

If you’re going into the big box tax store on April 14, those preparers are busting their behinds trying to make sure that everybody gets taken care of.  They’re probably exhausted from the long hours already.  If you go in at night, most of those folks have already put in eight hours at their day job already.  If there’s a line of people in the chairs, the office manager is probably cracking the whip, “Let’s keep it moving people!”  This is not the day that they’re going to ask you all of the questions they need to ask to give you the best service possible.  They have the built in questions in their software that they’re required to ask you, but don’t expect anything above and beyond the minimum if you go in during rush time.

If you go into a big box store on April 14th (or 15th or one of those late days) and there’s a big line and it looks crazy, the best thing for you to do is just file an extension.  If you think you owe, make a best guess as to how much you owe and pay it (keeps you from paying late payment penalties.)  An extension is an extension of time to file, it does not give you an extension of time to pay.  The penalty for filing late is much higher than the penalty for paying late though so even if you don’t pay, you’re still better off filing the extension than filing your return late.

If you’re at the big box store, they’re going to pressure you to file your return now instead of doing the extension.  Here’s why:  they get paid a commission for the tax returns they prepare during the tax season.  Most of them get laid off after the last filing date.  The few preparers who work during the summer get paid an hourly wage for the off season work and it’s not anywhere near the rate they get for their seasonal work.  Filing your extension doesn’t pay them much if anything so that’s why they don’t want to do it.

Now if you go someplace and it’s not a mad house and you find someone there that makes you feel confident, by all means go ahead and file.   Do it and be done with it.  Sometimes, while the 14th may be a madhouse, the 15th will be quite calm and a good time to file.  Use your good judgment.   Don’t file a tax return while feeling panic.  Fixing a bad return costs more than doing it right the first time.