When folks are unable to meet their paper tax return requirements by April 15, whether as a business, individual or both, an automatic extension is provided by the IRS if the extension is filed before April 15 on the correct IRS forms. That said, in some cases, people and businesses still run into trouble even meeting the extension deadline in October. There are a couple of tips that can help deal with this problem.
First off, late filers coming up on their valid extension deadline in October should file electronically. An electronic extension filing goes directly to the IRS, it verifies within 24 hours that the filing has been received, and you don’t have to trust the mail or someone else to get your return to the tax agency at the last moment. The deadline for most extension filings tends to be Oct. 15 each year, but those delayed due to disasters have until the end of the month to file, gaining a few more days’ time.
Second, filers should take advantage of the IRS’ Free File system if the filer’s gross income is less than $58,000. The filing can be made without any charge using the IRS’ website for access. Even if one’s income is over $58,000, the system can still be used for a charge instead of going out and buying a brand name software package.
Payment deadlines can also be met electronically on the IRS’ website to avoid late payment penalties and interest triggers. The IRS takes credit cards as well as electronic transfer from bank accounts. There is a convenience fee charge on credit card transactions, but the fee is far less than what tax penalties and interest can incur on a large amount of taxes due.
Third, if a filer can’t pay a full amount up front, than he or she needs to arrange for a payment plan with the IRS rather than ignoring the charge. A payment plan will show compliance with the IRS and the tax system. Ignoring the charge can trigger penalties and interest and finally tax liens and seizure of property.
Exceptions are made for active military members. For those serving in active combat zones or active military in combat, members have 6 months or 180 days to get tax returns filed after leaving the combat region. Much of the detail associated with this special circumstances is covered in IRS Publication 3 – Armed Forces Tax Guide.
Even when filing extensions, individuals and businesses should double-check that they didn’t miss out on a tax credit that became authorized during the extension period. For instances, many small businesses that pay health premiums can now become eligible to take the Small Business Health Care Tax Credit, started in 2010. Additionally, if a business suffered a significant loss in a current tax year, it can also be rolled backwards to a previous tax year, triggering a refund of taxes paid in the prior year. This is covered in detail in IRS Publication 536. Finally, there is the Making Work Pay Credit, which employees get automatically but freelancers and contractors need to proactively claim on their tax returns.
Sources:
IRS Publication 3, Armed Forces Tax Guide
IRS Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts