Filing Extensions for Your Taxes – 5 Fun Facts!

Photo by ALP STUDIO on Unsplash

Some people believe that filing your return by the original due date keeps you from being audited.  Others believe that filing an extension provides the same cover from audit.  Truth is, I don’t think either is true…maybe, but anecdotally, I’ve represented folks who always file on time and folks who always file an extension in audits and to me there is no correlation of audit to filing date.

Now, here are some TRUTHS about filing extensions that you should be aware of as the “tax season” begins to wind down –

1.  Due Dates: For calendar year partnerships, LLCs and S-Corporations was March 15, not April 15 like your personal taxes.  If you didn’t file your return or an extension you are already late and will incur late filing penalties.  Calendar year corporations and individuals are due on April 17 this year.

2.  NOT A WAY TO PAY LATE, ONLY TO FILE LATE:  Filing an extension only gives you longer to file your return, NOT pay your taxes.  If you believe you will owe taxes you should be paying what you estimate you will owe along with the extension.  If you pay after 4/17/18 you will incur a penalty for failure to pay on time.  BUT…the penalty for failure to file on time is much bigger so even if you don’t send a payment, file an extension if you’re not yet ready to complete the return and avoid higher penalty burdens.

3.  If You’re On An Installment Plan or Settlement:  If you are on an installment plan or have an accepted Offer In Compromise, you can still file an extension but you must make a payment to cover taxes you presume will be due when you file the actual return.  Failure to do so can cause the IRS (and the states) to default your payment plan or settlement.  Of course, some people weigh the consequence of the penalty with the opportunity costs associated with paying late, I don’t advise you do that without consulting your tax adviser, but there are possibilities there.

4.  DUE DATE OF RETIREMENT CONTRIBUTIONS :  If you want to contribute to an IRA or ROTH IRA for 2017 you must make that contribution by 4/17/18.  However, contributions to other retirement plans like SEP-IRAs may be due by the due date of the return including extensions, so if you don’t have the cash to make your desired retirement payment for 2017 right now, you can file an extension and file your return when you have the money to make your contribution.  Check with your financial adviser about which plans qualify.

5. S.O.L – As in Statute of Limitations – Know that the IRS can choose your return to audit up to three years after the due date or the filing date of the return, whichever is latest.  So if you do file a return with on an extension, know that they have up to three years from your filing date to question you on what you’ve submitted.  That’s not a good thing or bad thing, just a thing….some folks feel at ease when their statute is closed.  And of course, there is no Statute for fraud, so I’m not intending you rely on this pointer to suggest any fraudulent reporting will be safe after three years.

And one last fun fact, at least to me – Washington DC celebrates a day called “Emancipation Day” which honors the signing of the Compensated Emancipation Act signed by Abraham Lincoln on April 16, 1862.  Any time the due date for taxes falls on April 16, we get one more day to file, so Yay!

Ok, if you need an extension or have any questions you can always contact us.

We’ll chat again soon!

Susan

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close