Are you a procrastinator? Most people feel that they are not procrastinators except when it comes to certain things; like filing taxes. It is one thing in life that always seems to remind us exactly where we stand. It can be a frightening prospect and it happens every year. One of the worst things about tax filing time is not being prepared and this often leads to the procrastination in filing taxes. Yet if you are an individual or a business filer, you need to ensure that you are at least prepared to file a tax extension to avoid hefty penalties, fines, and compounding interest fees.
Easy Solutions for Individuals
It may be a simple question of, are you ready to file your taxes? Many people simply procrastinate when it comes time to file and the deadline is looming (like it is now). April 15th is just around the corner and you should be prepared for that deadline by being proactive in the easiest ways possible.
Pay Your Taxes
If your lifestyle and career have not changed significantly since the last time you filed your taxes (last year), then you have a very simple solution to extend your tax filing and avoid any late fees, penalties, or interest charges: pay your taxes. As long as you have paid 90% of your tax liability, you will not incur any penalties or fees except an interest charge on any outstanding balance. Paying your taxes by April 15th also automatically gives you a six-month filing extension, allowing you the opportunity to do your taxes on your time.
Apply for a Filing Extension with Form 4868
With this form, included in most e-file and online tax software, you can simply file Form 4868 and receive a six-month extension on your tax filing deadline. However, remember that you will still accrue interest on any late tax liability (the interest rate is the Federal short-term rate plus 3%). If you do not file an extension or your return by April 15th, the penalty for not filing is usually 5% of the tax owed per month.
Start the Process
No matter your situation, remember to maintain accurate records for your taxes and keep all your documents in a secure and accessible place. This allows for speedy filing when it is necessary and makes the process even easier. Do a little at a time so it does not feel overwhelming.
If you are a business, most often it is not a case of procrastination that brings the need for a tax extension. Many businesses find that certain vital information needed for filing is not yet available, whether it’s because you are waiting for documents to arrive or because your fiscal quarter or year end has not happened yet. In these cases, it is smart to apply for a business extension for the same reasons you would get a personal extension – to avoid IRS late penalties, fees, and interest.
Businesses need to file Form 7004 on or before March 16th in order to receive a five- to six-month extension. To avoid being charged late payment penalties, a business should pay at least 90% of its tax liability by the original March deadline. Most businesses are required to make quarterly income tax payments – to estimate your tax liability, multiply your taxable income by the appropriate tax rate, then subtract your quarterly payments and you’ll have an idea of how much you need to pay to avoid late fees.
Being prepared as a business or an individual is as easy as paying 90% of your tax liability before the filing deadline and knowing what that amount is.