The Tax Extension Deadline Is Fast Approaching

September 26, 2011

Living in a Southern California city like Los Angeles, Encino, Woodland Hills, Beverly Hills or even Malibu, it can often feel that everything is rush, rush, rush.  Without a doubt, it’s easy to fall into the trap of falling behind on things like taxes when simply trying to keep up with the frenetic pace of life. But, being late on paying your individual income tax is definitely not something you want to do! 

If you needed more time to prepare your federal individual income tax return before the April 15th deadline, hopefully you filed Form 4868 Application for Automatic Extension of Time to File U.S. Individual Tax Return.  Yes, the US Department of the Treasury will give you an automatic extension for up to six months; you just have to fill out a form.  And, if you have your calendar handy, you’ll note that your six months will be up on October 17th(When October 15th falls on a weekend or a holiday, the extended individual income tax deadline is moved to the following Monday.)

While offering tax payers an extension to file Form 1040 is a nice service provided by the IRS, it is by no means free.  Keep in mind, this extension only applies to your return, and not to your bill.  The IRS likes to receive their money on time, and it will cost you to send it late.  These penalties can really add up, especially if you have a large tax bill, so it truly pays not to ignore payment deadlines.

You will owe interest on any tax not paid by the regular due date of your return, even if you have filed for an extension.  The interest runs until you pay the tax. Even if you had a good reason for not paying your individual income taxes on time, you will still owe interest.

Late Payment Penalty
The late payment penalty is usually ½ of 1% of any tax (other than estimated tax) not paid by April 15th. It is charged for each month or part of a month the tax is unpaid. The maximum penalty is 25%.  The late payment penalty will not be charged if you can show reasonable cause for not paying on time. You will need to attach a statement to your return fully explaining the reason.  You are considered to have reasonable cause for the period covered by the automatic extension if at least 90% of your actual 2010 tax liability is paid before the regular due date of your return through withholding, estimated tax payments, or payments made with Form 4868.

 Late Filing Penalty
A late filing penalty is usually charged if your return is filed after the due date (including extensions). The penalty is usually 5% of the amount due for each month or part of a month your return is late. The maximum penalty is 25%. If your return is more than 60 days late, the minimum penalty is $135 or the balance of the tax due on your return, whichever is smaller. You might not owe the penalty if you have a reasonable explanation for filing late. Attach a statement to your return fully explaining the reason.

 You should, of course, make every attempt to file your individual income tax returns by the deadline to avoid interest and penalty fees.  Keeping good records, and getting help filing taxes from a CPA Firm that specializes in individual income tax preparation will keep you on track to meet filing deadlines, or request extensions.