Reminder: Personal Tax Extension Deadline Is October 15
Many people don’t recognize the fall as a busy tax season. But if you extended your tax return, your new deadline to file is fast approaching; October 15th is exactly two weeks away. For those who haven’t yet filed their complete 2020 tax return, here are a few important reminders for the approaching deadline.
You Should Have Paid Your Estimated Taxes
Many taxpayers filing a tax extension for the first time don’t realize that it is only an extension for filing your return—not an extension to pay your taxes. (Payment extensions are also available, but must be applied for and approved separately.) So, when you filed for your extension back in April, you should have estimated the taxes you owed and made that payment to the IRS.
If you did not do this, you will be subject to penalties for any unpaid amount, in addition to whatever you would normally owe in taxes.
You May Still Have Some Penalties
While we’re on the subject of penalties, please be aware that, in some cases, you may still have to face late-payment fees on your extended return, even if you made an estimated payment. Since your complete return wasn’t ready when you made your estimated tax payment, it’s possible that you didn’t pay the correct amount. If you did underpay on your taxes, when you file your complete return, you will still have to pay penalties on the unpaid amount.
Of course, this still means a significant reduction in penalties: Not only will you be paying less in those late-payment fees, since you already paid at least a portion of the taxes you owed, but you’ll also be avoiding the 5% per month late-filing penalty since you extended. Overall, an extension and estimated payment can make a huge difference in what you pay in penalties to the IRS.
Additional Extensions Are Sometimes Available
What if these additional six months simply weren’t enough time for you to put together your complete return? Can you file another tax extension? The answer to this is yes—and no. No, you cannot request multiple tax extensions for the same tax year. However, there is a separate process that can provide you with additional time to file in certain circumstances.
While getting an initial tax extension is relatively fast and easy (and almost always approve by the IRS), request additional time to file beyond that six-month extension is a bit more difficult. You’ll need to fill out Form 4868 and mail it to the address found on the form, under the heading “Where to File.” You’ll need to include a letter explaining why you need this extra time—and it can’t just be that you forgot to get your paperwork together. The IRS will only approve additional time to file your return in cases of undue hardship.
You Have More Time in a Disaster Area
Recent hurricanes have resulted in several areas of the United States being declared a federal disaster zone. If you live in one of these areas and you previously extended your tax return to October 15th, you may have more time to file due to the impact of the natural disaster. Please visit the IRS website to learn more about disaster relief and tax waivers.
If you don’t reside in a disaster zone, but your tax records are located in one—for example, if you have a business located in a disaster area, and a bookkeeper at that location with all of your business’s financial records—then this same disaster relief can apply to you as well. The IRS will typically provide a new due date for these areas, and if you file by that deadline, any late filing penalties will be waived.
Don’t Miss the Extension Deadline
As we stated earlier, the deadline is just two weeks away now. If you have yet to file your 2020 return, it’s important that you do so as soon as you possibly can. Should you miss your new deadline, late-filing penalties will once again be applied to your return. (In case you forgot, that’s a 5% penalty for every month or portion of a month that your return is late.)
For those struggling to get their personal tax returns ready in the next two weeks, we encourage you to reach out to one of our CPAs to see how we can help you. We’ll work with you to get your return filed as soon as possible. Give us a call to get started as soon as possible, so the deadline doesn’t pass you by!