Everyone knows that federal income taxes are due on April 15th of every year, but what happens if there is a problem completing the return or paying on time? Many assume that the consequences will be harsh, but that is not always the case. The key is to take some simple steps prior to the deadline so that the Internal Revenue Service knows that the process has at least started. Doing nothing at all can result in serious problems, so be sure to contact the IRS if there will be a delay.
Request a Filing Extension
For those who cannot file a return by the April 15th deadline, there is a possibility to obtain an automatic four-month extension. Approximately six million citizens utilize an extension every year. To file for an extension, fill out Form 4868, an Application for Automatic Extension of Time to File a Tax Return. This will need to be turned in by the regular deadline for filing income taxes. This will provide the taxpayer with a new deadline of August 15th.
If more time is needed, a second extension can be requested by filling out Form 2688. It must be filed by August 15th in order to be considered. It will be necessary to provide a probable reason for the extension. If the extension is granted, it allows for a deadline of October 15th to file.
Keep in mind that an extended deadline does not allow for a longer time to pay taxes. If money is owed to the IRS, an estimated payment will need to be sent with an extension request. At least 90 percent of the bill will need to be paid in April. Otherwise, there is the probability of incurring penalties and interest for any amount that is not paid.
What Happens If an Extension Is Not Requested?
For anyone who does not make this request to the IRS by April 15th, they can impose a stiff penalty of up to five percent for each month not to exceed 25 percent. Interest will also be applied to the money that is owed.
What If the Money Owed Cannot Be Paid?
There may be instances in which it is difficult to make the required payment to the government. If the full payment cannot be remitted, send in as much as possible with a filed return. There is a much worse penalty for not filing at all than for not paying after filing. A penalty can be as much as 25 percent for not filing at all.
Paying taxes is an inevitable task for everyone in the country. It is important to file on time and pay what is owed. Make sure to always pay attention to due dates and file extensions if necessary. If a large bill is expected, consider putting some money into a special bank account dedicated to taxes. This will help prevent any surprises from appearing.