You may have to pay a penalty if the amount owed
is at least $1,000 and it is more than 10% of the tax shown on
your tax return. However, you will not owe the penalty if your
2013 tax return was for a tax year of 12 full months and there
was no tax shown on your 2013 tax return and you were a U.S. citizen or
resident for all of 2013. Also, you will not owe the penalty if your 2013
tax return was a tax year of 12 full months and line 7 on your 2014 tax
return is at least as much as the tax shown on your 2013 tax return.
One thing is to file your tax
return on time, and another thing is to not pay your taxes on time. You can
always get an extension to file your tax return, but you cannot get an
extension to pay the taxes owed. Well, you can get an extension to pay, but
will be penalized with penalties for paying late and interest on the late
payments. Failure to pay by the deadline will result in a failure-to-pay
penalty of 1/2 of 1 percent of your unpaid taxes. If you pay at least 90
percent of the amount owed with your extension to file request you may avoid
the failure-to-file penalty as long as you pay the remaining amount by the
extended due date. There are two penalties you need to attend to. One is the
late-filing penalty and the other is the late-payment penalty and your goal
should be to avoid both.
If you cannot pay the full amount when you file,
you can ask for an installment agreement or ask for an extension
of time to pay. Remember your extension of time to file is not an extension
of time to pay. This does not mean that you cannot ask for an extension of
time to pay, it is just that this extension of time to pay will cost you in
interest and penalties.
With our current pay-as-go tax system, taxpayers
are obligated to pay their tax every time they get a paycheck. If the
taxpayer or employer does not follow the pay-as-you-go system, they have to
pay penalties for not making timely payments and also pay interest for the
time that the money was not received on time. The IRS will accept your
return without the payment but will send you a letter asking you for payment
and will have the interest and usually the penalty for not paying your tax
will be calculated in that letter. The worst thing you can do is not send
your tax return.
If you cannot file on time, you can get an
automatic 6-month extension if no later than the date your
return is due, you file Form 4868. In order for your extension
of time to file to take effect, you must file by the due date of your tax
return.
You have to file this extension on or before
April 15 or the due date of your return, which could be either April 16, or
April 17 depending on what day of the weekend or holiday April 15 fell on.
You cannot realize you did not file your tax return by the due date and all
of a sudden decide to send your Form 4868 request for extension of time to
file on April 20th. The Internal Revenue Service processing center probably
receives thousands of Form 4868 after the required due date and they
probably just either toss them away or send you a letter to let you know
that the request for an extension of time to file your return has been filed
late and ask you to immediately file your tax return. Although, they
technically can charge you a late filing penalty, they might waive it if you
comply with their letter and send your tax return immediately.
If you get an automatic extension, you have until
October 15, 2014 to file your tax return but not to pay the tax
you owe. Clear this confusion now, the automatic extension of
time to file is not an extension of
