Well, here we are. The personal filing deadline (April 18th) is *so* close.
Yes, it’s officially the final week of tax season — and we are working our tails off for our clients!
There’s a lot of “business” in this note, so please make sure you read it all — it could make a huge difference. (Honestly, I much prefer writing the notes that are a little more “interesting”, but this is really crucial information.)
This is often our busiest week of the year (so please be understanding), and it’s also the week when we receive, with clockwork regularity, many questions about extensions and payment options.
But before I get to that: other deadlines that fall on April 18th this year:
1) Estimated taxes for the first quarter are due.
2) Want to open or contribute to an IRA or Roth IRA for 2015? Gotta get that done by Monday the 18th.
3) Final day to max out contributions for your 2015 HSA (Health Savings Account).
4) Claim any refund money from an unfiled 2012 return (there is almost $1BN of unclaimed refund money out there for that year — but only available if you didn’t file then).
5) Most states tax deadlines also fall on the 18th. (Exceptions – DE 4/30; HI 4/20; IA 4/30; LA 5/15; ME 4/19; MA 4/19; VA 5/2; any state with no income tax.)
Alright — let’s dive into my thoughts on extensions and payment options (if you aren’t able to pay your tax bill right away)…
Reginald “Kim” Boldon’s Tax Extension Tips
“Worry never robs tomorrow of its sorrow, it only saps today of its joy.” -Leo Buscaglia
As you know, this upcoming Monday, April 18, is the filing deadline for a federal tax return. If you need more time to get your paperwork complete, you need to file (or have us file on your behalf) this form: http://1.usa.gov/23p6ICM with the IRS by the end of the day on the 18th. This gives you an automatic six-month (until October 17, 2016) extension of time to file.
Here’s the deal: An “Extension of Time to File” is not an “Extension of Time to Pay”, unfortunately. The Extension simply gives you an automatic six months of additional time to get your paperwork together and file that return. But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference — so PLEASE don’t take the entire six months to do this!
So, when filing your “Extension of Time to File”, you’ll need to estimate what you think you owe to the IRS. This should not be pulling numbers out of thin air (or other various body parts)! You’ll still need to go through your receipts and tax documents and get them “somewhat” organized.
From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam. Keep in mind that this is an ESTIMATE. And, you’ll have to pay what you estimate you owe at the time we file for the extension.
You can do this all electronically through our office, you can mail in the form WITH estimated payment (must be postmarked by the 18th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.
If you cannot pay your taxes due for some reason:
1) Pay as much as you possibly can right now.
2) You can ask for (and often receive) a tax extension of up to 120 days to PAY:https://www.irs.gov/taxtopics/tc202.html. It requires a phone call to the IRS. 🙁
3) “Financial hardship” delay: this is if paying your tax bill would demonstrably affect your ability to pay your other bills. Interest and penalties still accrue, but it’s better to register this with the IRS than to simply ignore the bill.
4) Installment payment plan: If you owe less than $50K in taxes, you should usually be able to get an installment payment plan of up to 72 months, simply by asking for it. If this is something you are considering, please let’s talk it over to make sure we come up with the best plan. But you can apply online for this here: https://www.irs.gov/Individuals/Online-Payment-Agreement-Application
5) Negotiate: this is NOT something to try on your own. We can help, but the number of “Offers in Compromise” that get accepted each year are quite small and a knowledge of how the system works is important.
6) Using existing credit sources (credit card, HELOC, private loans): some tax advisors would quickly recommend this, but I would NOT recommend you go this route. If you’ve exhausted the options above, do this instead:
7) Sell something you don’t need anymore. Always a pretty good plan anyway.
PHEW! That was a lot of information. I truly hope it is helpful.
Reginald “Kim” Boldon
RKB Accounting & Tax Service, LLC