Each year many taxpayers find themselves facing tax problems. These problems can range from unpaid back taxes, errors on tax returns, or audits. However, a common scenario seen at during tax time is that some people need to file extensions. You have likely heard about filing an extension, but you may not understand what it entails. The following points will help you to get a better understanding of the matter.
Everyone who files late does not need to file an extension.
One common misconception is that everyone who does not file by the due date must file an extension. You need to file an extension if you owe the IRS taxes and cannot file on time. If you are expecting a refund, you do not have to file an extension. However, do not assume that you will be receiving a tax refund. Also, keep in mind that you may be owed a federal refund but owe taxes in your state. A tax professional can look over your tax information and estimate the amount of money you owe in taxes or may be owed as a refund.
There are penalties for filing late if an extension is not filed.
The penalties assessed are fines. It is possible to get them waived if you can provide a reasonable explanation to the IRS about why you are filing late. However, keep in mind that they will make the final decision regarding whether or not to waive the fees.
There is a difference between late filing and late payments.
Some people make the mistake of thinking that filing for the extension will give them extra time to get the money to pay their taxes. However, the extension merely gives taxpayers time to file their taxes, and if possible, they should send the estimated taxes owed with their extension requests. This will help to protect them against late payment fees assessed by the IRS. You can also request that late payment penalties are waived when you file your taxes, which would require you to explain why you did not make your payments on time.
A tax professional is a good resource to use if you need to file an extension. They can also assist with other IRS problem resolutions as well as understanding forms that you may have been sent. For example, you may have been sent an interest and dividend form by your bank and not be sure what to do with it.