A tax extension is a request for more time to send returns to the federal and/or state taxing authorities in which you owe tax. A request for more time is not an extension of more time to pay any tax due. The federal and/or state taxing authorities need to receive 100% of all tax due by April 15th (or the actual filing deadline, if adjusted by weekend/holiday) each year in order to avoid penalties and interest charges. Therefore, you the taxpayer has the responsibility of estimating whether you might owe tax.
How could people know how much they will owe before the taxes are calculated?
You are the only one who knows what you have earned, what has changed about your incomes. If you want help in estimating, you can go to www.irs.gov or any state taxing authority’s websites, which all have calculators to assist you. Most states and the fed also have call-in phone lines. It often takes quite some time and you could still end up “guesstimating” wrong. If you are truly averse to any possibility of any interest or penalty for underpayment, then you could/should over-pay estimates before the filing deadline.
For instance, if last year a couple had $8,000 of total taxation on $90,000 of income and this year they had already had withheld $8,000, but they have sold additional stock, inherited an IRA, or had a large gain in business income, they may be nervous about estimating correctly. To reduce their anxiety. they could just send an additional $4,000 of estimated on top of the $8,000 they have already had withheld. 50% more than what they paid last year should keep them from owing or worrying about penalties. In a few weeks, they will get the refund of any over-payment back so, either way, it’s a few weeks of you owing interest for underpaying or a few weeks of the IRS having your money and paying no interest to you.
Always remember that any form being mailed by you to a federal or state taxing authority should be sent “return receipt requested” at the United States Postal Service. Anyone using e-file extensions online should also print a copy for themselves and possibly for the tax preparer. Tax professionals all over the country will all continue to work hard to finish these returns in a timely manner, but the filing deadline is coming.
The paperwork you can have another 6 months to send, its just the tax itself that they want by the April deadline!Go Back