Many people are self-described procrastinators and wait until the last possible minute before sending in a bill or completing a work project. While service providers or a boss may let this type of behavior slide, the Internal Revenue Service is not likely to be as forgiving. For taxpayers who have yet to file their income taxes, the April 15 deadline is quickly approaching and it's important for individuals to either submit their forms by that date or file a request for an extension.
People who are concerned that they won't be able to complete their forms by April 15 should consider speaking with their tax preparer about filing an extension or going on the IRS website to navigate through the process. If approved, individuals will get an additional six months to submit their paperwork to the federal agency. Individuals who want to file an extension can do so by filing Form 4868 "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return." This can be a beneficial way to avoid the high failure-to-file penalty that will be imposed for individuals who owe taxes. Failure-to-file penalties equate to 5 percent of any unpaid taxes for every month the return is late, up to 25 percent.
Filing an extension will not absolve individuals of their payment responsibility
While an extension may give individuals more time to file, there is another crucial point that some people often overlook. Those who owe any taxes will still be required to pay their liability by the April 15 deadline, or also face a failure-to-pay penalty. Before individuals file their request, they should have a good idea of whether they owe money and, if so, how much they expect to pay. Otherwise, interest and penalties will be assessed, which can raise their tax bill by as much 25 percent.
For individuals who are afraid to submit their forms because they know they owe a balance that they may not be able to pay, it's better to send in their returns anyway to avoid the additional failure-to-file penalty. If they are unable to pay a balance, they may qualify for a payment agreement program with the IRS that allows them to pay the bill over time.
Taxpayers should only rely on an extension if there are significant obstacles that are keeping them from filing their returns. Otherwise, a licensed tax professional can help them file their forms quickly before the deadline and give them the peace of mind that their obligations have been met.
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