With tax extension deadlines fast approaching, both individuals and businesses who have applied for a six month-extension should be aware of the importance of meeting the tax extension due dates set by the IRS. A point fact is that failure to do so could initiate the assessment of a failure-to-file penalty on top of any penalty and interest charges that may already be in place. Since the original filing deadline for Corporations, S-Corporations, Sole-Proprietorships, Partnerships and LLCs is usually March 15th, those entities who file for a six-month extension must normally meet an extension deadline of September 15th. However, since Septembers 15, 2018 falls on a Saturday, this year’s business extension deadline has been moved to Monday, September 17th. The six-month tax extension deadline for extended individual returns remains at its normal date of October 15th.
In addition to meeting the deadlines, it is important to realize that the IRS expects taxpayers to pay any income taxes owed either on or before the original designated filing deadlines of March 15th (business tax returns) or April 15th (individual tax returns) unless that deadline falls on a weekend as the individual deadline did in 2018. If this was not done and there is a tax balance due, interest and failure-to-pay penalties will very likely be assessed at the time the extended return is filed. While a business or individual usually requests tax extension because they are missing some necessary tax information, it should be possible to come up a rough estimate of any tax amount owed. For businesses, a fairly accurate estimate of this amount can normally be obtained by multiplying the taxable income of the business by the current business tax rate and then subtracting the amounts of any estimated tax payments made during the tax year in question. Although this method does not take into account available tax credits, tax deductions or business expenses, it should provide a good enough rough estimate to avoid major penalty and interest charges. Individual taxpayers can get a similar estimate of taxes owed by multiplying taxable income by the current tax rate and subtracting any taxes paid.
While interest and failure-to-pay penalties will be assessed on any past due tax, failure-to-file penalties can be avoided by applying for a tax extension and then filing a completed tax return on or before the extension deadline. Interest on a back tax balance is compounded daily at a rate equal to the federal short-term interest rate plus 3% while failure-to-pay penalties are assessed at a rate of 0.5% of any tax amount owed for each month or partial month that the outstanding balance remains unpaid. However, taxpayers who file for a six-month tax extension and pay at least 90% of the tax amount due at the time the extension is filed are exempt from failure-to-pay penalties. On the other hand, those who file for an extension and fail to meet the extension deadline are normally assessed a failure-to-file penalty on top of the charges already mentioned. The accrual and compounding of these charges can significantly increase any tax burden, thus highlighting the importance of remaining tax compliant.
If you are facing a tax extension deadline, the tax professionals at Los Angeles Bookkeeping stand ready to help you meet your impending tax obligations. Conveniently located in Beverly Hills, California, Los Angeles Bookkeeping employs Certified Public Accountants and licensed Enrolled Agents who have the knowledge and experience necessary to help every client attain the maximum tax advantage possible. Don’t delay! Contact the tax professionals at Los Angeles Bookkeeping today to get your tax return preparations underway. Schedule a free, no obligation consultation by emailing us at firstname.lastname@example.org or calling us at (310) 765-1596.