Retaining tax funds as working capital for trading is not reasonable cause. The IRS mentions “reasonable cause” for avoiding late payment and late filing penalties. Even if you had a good reason for not paying on time, you will still owe interest.” You will owe interest on any tax not paid by the regular due date of your return. Do not attach the statement to Form 4868.” Attach a statement to your return fully explaining your reason for filing late. You might not owe the penalty if you have a reasonable explanation for filing late. If your return is more than 60 days late, the minimum penalty is $135 (adjusted for inflation) or the balance of the tax due on your return, whichever is smaller. The penalty is usually 5% of the amount due for each month or part of a month your return is late. A late filing penalty is usually charged if your return is filed after the due date (including extensions). You are considered to have reasonable cause for the period covered by this automatic extension if at least 90% of your actual 2015 tax liability is paid before the regular due date of your return through withholding, estimated tax payments, or payments made with Form 4868. Do not attach the statement to Form 4868. Attach a statement to your return fully explaining the reason. The late payment penalty will not be charged if you can show reasonable cause for not paying on time. It is charged for each month or part of a month the tax is unpaid. The late payment penalty is usually 1⁄2 of 1% of any tax (other than estimated tax) not paid by April 18, 2016. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances.- “ Late Payment Penalty. You’ll get an automatic extension just by paying, but you do have to fill out your return eventually.Ĭandace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. To get an extension without the form, you can pay all (or part) of your estimated income taxes online. You’ll need to fill out Form 4868, then mail it or file it online using IRS e-file. There’s No Extra Time to Make Traditional IRA ContributionsĬontributions to a traditional IRA and Roth IRAs are still due by the original April deadline. While an extension will reduce your 5% monthly late filing penalty, any outstanding tax balance will still be charged a late payment penalty of 0.5% per month. The ConsĪs I already mentioned above, an extension will give you extra time to file your return, but any tax you owe is still due by the original deadline. Filing an extension provides these taxpayers with an additional six months to do so. If you’re self-employed you may want to make contributions to your SEP IRA or SIMPLE IRA to reduce your tax liability. It Gives the Self-Employed More Time to Make Retirement Contributions However, if you are due a refund, there are NO penalties. If you have tax due and do not make a payment until you file, you will just owe the 0.5% monthly late payment penalty. If you file an extension and then file your return by the extended deadline, you’ll avoid the 5% per month late filing penalty. The second is a late payment penalty of a 0.5% per month. The IRS imposes two types of penalties: First is a late filing penalty of 5% per month on any tax due. Having extra time to finish your return is often necessary if you’re still waiting for tax documents from employers or if you need additional time to organize your deductions. You’ll Have an Extra 6 Months to Gather Your Information While an extension gives you extra time to file your return, it does not give you extra time to pay your tax. You don’t have to explain why you need the extension and the extension automatically moves the filing deadline for personal tax returns to October 15th. Considering the tax extension deadline is just a couple days away, I thought it would be a good time to dive into everything you need to know about tax extensions! The IRS reports that as of April 15th each year, about 50 million taxpayers still need to file their taxes (!!!)… so if this is you each year, keep reading.įiling a tax extension request asks the IRS to give you some additional time to file your tax return.
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