We normally focus on meditation, mindfulness and self-discovery here on the Responsive Universe Network. But lets face it, sometimes life has an uncanny precision at dragging us away from the center of our energy and True Nature. Tax season can be one of those culprits and yes, here in the United States, filing those dreaded returns is right around the corner. Writer and guest blogger, Julie Morris give us some tips to being more mindful this tax season:
Extensions are commonly misunderstood by American taxpayers. Should you file one? Not if you can help it—in most cases, the average taxpayer has plenty of time to file by the deadline (this year, you get an extra three days with an April 18 deadline). However, some taxpayers need an extension. Maybe they have to hunt down missing documents, there was an unexpected event such as a death in the family, or they’re new to paying US taxes and fell behind on getting professional help.
All extensions must be filed before the April 18 deadline. Otherwise, you’ll likely get slapped with a late payment and/or filing fee. Extensions can be a great help in buying time, but you still need to abide by deadlines. If you do file for and get an extension, you’ll have until October 17, 2017, to file your 2016-year taxes. Also remember that extensions are just that: They simply extend the amount of time you have to file your taxes—you don’t get more time to actually pay those taxes.
If you think you’ll owe money, you still need to estimate how much that will be, and either pay in full by April 18 or set up a payment arrangement with the IRS. A CPA can help estimate taxes due, and also aid in scheduling estimated quarterly tax payments going forward, if applicable. If you’re a small business owner or contractor, paying quarterly taxes is often a great way to plan ahead, not get an IRS penalty, and avoid owing a large sum (or getting a huge sum back) next April.
How Can I File an Extension?
Think an extension is for you? There are a few ways to file one. The easiest for many is e-filing federal tax extensions with an online program or with W2 or 1099 software. You can e-file an extension request, make an estimated tax payment, and access both hard and soft copies of all your documents. E-filers will get a notification if and when the extension is accepted.
Alternatively, you can print and mail your extension request to the IRS with Form 4868: Application for Automatic Extension of Time to File US Individual Income Tax Return. It’s an incredibly short, easy form to complete, and all instructions are included. Make sure to make a copy and preferably scan this form just in case of any troubles. Just like e-filing, you’ll also want to estimate any taxes owed and postmark payment by April 18.
What About State Taxes?
Similar to how you file federal and state taxes separately, the same goes for extension requests. Some taxpayers are able to file state taxes by the April 18 deadline, but need an extension for federal—and vice versa. If you’d like to file a state extension, the regulations vary from state to state. You’ll have different deadlines and mailing addresses, so check your state’s tax site for information. However, it’s safe to assume that you’ll need to also file your state extension request no later than April 18.
If you’ll be making any payments by credit card, you can do so via the IRS’s preferred Electronic Payment Methods. You can also pay by check or phone, but paying via credit card is much easier to track, and you’ll get automated updates from the IRS. Keep in mind that estimating your taxes owed isn’t so much an “estimation” as a mathematical equation that you need to get very close to correct. If you underpay, you’ll owe interest on the unpaid amount if it’s not received by April 18. If you underestimate by over 10 percent, you’ll also get a 0.5% penalty applied every month until the balance is paid.
Extensions and estimating payments are within the scope of a CPA. It’s just another reason to get this tax professional on your side before tax season really takes off.
Author: Julie Morris
Image source: Pixabay