Episode 24: In this episode, Timalyn discusses tax extensions. The tax deadlines are quickly approaching, so this information is extremely timely. She'll explain what the extension is, what you need to do, and the IRS forms you'll need. She will also discuss how an extension doesn't prevent certain IRS penalties, even if you filed the tax extension properly.
While there's still time, many individuals and business owners may feel rushed to file their taxes. When that happens, mistakes often occur. Making mistakes on your tax filings can come with serious consequences. You don't have to risk making mistakes. Instead, consider filing for a tax extension.
What Is a Tax Extension?
A tax extension is simply a request for more time to get your tax return filed. This is not an extension to pay. Timalyn will cover more about this important difference in a few minutes.
Individuals will use IRS Form 4868 to file for a tax extension. S-Corp or Partnerships will use IRS Form 7004 to file for an extension. You will automatically get another 6 months to file your federal tax returns. Individuals will have until October. S-Corps and Partnerships will have until September.
How Do I Request a Tax Extension?
Timalyn explains there are 3 ways to request an extension.
Option 1 is to complete the form provided by the above links. You'll need to estimate your tax liability. You or your tax professional can do this. Next, you'll need to determine your estimated tax payments. Then simply mail it to the IRS using the appropriate address provided in the instructions. Use your updated address on the form. It's possible you may have moved since the end of the previous mail.
Option 2 is to e-file it through the IRS system, through a third-party portal (e.g. TurboTax), or let your tax professional handle it. Timalyn admits you might be able to determine the required information and submit the information on your own. However, mistakes by people trying to handle it themselves are often made.
Option 3 is to use the IRS Direct Pay/EFTS system. You'll make your payment, but remember to mark it for an extension, allowing more time for you to actually file the return, itself.
Note: For S-Corps and Partnerships, the process is similar, but you'll have to provide a reason for the extension request. Remember, you'll also need to complete this by March 15, 2023. The extension request won't be valid if you submit it after the required filing date.
Timalyn recently posted a video to show how to file IRS Form 4868 on her YouTube Chanel.
What an IRS Tax Extension Is NOT
Timalyn clarifies that a tax extension only applies to the actually filing of the tax return. It is not a request to pay later. For this reason, she always encourages people to file as soon as they can, rather than wait the full 6 months of the extension. Why? It's because you can minimize the associated penalties.
If you owe taxes, even with a tax extension, you'll be assessed a failure to pay penalty. This penalty is 0.5% for each month the tax debt is not paid. Timalyn also has a video on calculating estimated quarterly tax payments. Also, she covered estimated quarterly tax payments for small business owners (and some individuals) in Episode 21.
Some people decide not to file because they don't have the money available to pay their tax liability. Without filing for a tax extension, you will also be assessed a failure to file penalty. The penalty is 5% per month, based on your tax liability. The maximum failure to file penalty of 25%. In this case, you'll now be hit with an underpayment penalty, a failure to pay penalty and a huge failure to file penalty. Wouldn't it be better to at least file the tax extension?
Final Comments for this Episode
First, the discussion today focuses on federal tax issues. Your state may also require steps to deal with an extension at the state level. Timalyn encourages listeners to consult with their individual State Department of Revenue for information related to state tax filings.
Second, if you enjoy the information Timalyn provides in this podcast, it would be extremely helpful if you'd consider leaving a review on whichever podcast app you use to listen.
Unfortunately, 1 in 50 tax payers have some type of tax problem with the IRS. Please consider sharing this episode with your family and friends.
As we conclude Episode 24, we encourage you to connect with Timalyn on social media. You'll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.
Remember, Timalyn Bowens is America's Favorite EA and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .
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Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
