Tax Deadline Nears, But Extensions Are Easily Available

By John L. Duoba, Toolkit Staff Writer

With April 15 looming on the horizon, you may have come to the realization that you (or your accountant) simply can't get all your federal income tax forms accurately filed by that critical date.

If you're only going to be one or two days late, don't worry. The Internal Revenue Service (IRS) has historically permitted a minimal delay of a day or so without applying any penalties.

Also, if you're a member of the Armed Services currently serving in an active combat zone (or serving in support of combat operations), you'll be given an automatic 180-day extension to file. Taxpayers covered by these relief provisions should put the words "COMBAT ZONE" and their deployment date in red at the top of their tax returns when they do file. Additionally, taxpayers who receive a notice from the IRS regarding a collection or examination matter should return the notice to the IRS with the words "COMBAT ZONE" and the deployment date in red at the top of the notice, as well as put "COMBAT ZONE" on the envelope so the IRS can suspend the action. More information can be found at the IRS site.

For everybody else, it's not that automatic, but it is easy. If you need more time than that to satisfy your federal income tax obligations, you can get an extra six months to file by sending Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to the IRS by April 15. The extended deadline will be October 15.

You don't need to give any reason to the IRS when filing for this extension. Aside from running out of time, some common reasons for filing late are to take advantage of a later contribution to a Keogh plan or to allow more time to set up an SEP-IRA account--and you'll have up to October 15 to take either of these actions.

To take advantage of the extended deadline, you must estimate your total tax liability based on the information you have when requesting the extension. If the IRS later finds this estimate to be unreasonable, your extension will be void and late filing penalties will be applied retroactively.

A filing extension does not give you more time to pay any taxes owed. You should pay any projected balance due with the Form 4868, but if you can't pay the full amount at that time (or you don't know exactly how much you will owe), you can still get the extension.

Interest and penalty charges apply to any tax not paid by April 15. The current rate is based on the federal short-term rate plus 3 percentage points, compounded daily. It is subject to change each calendar quarter. You may also be liable for a late payment penalty of 0.5 percent per month if the total you have paid by April 15 is less than 90 percent of your actual 2007 tax, or less than 100 percent of the tax you owed for 2006.

Form 4868 is available from the Business Tools area or may be found on the IRS site at http://www.irs.gov. Form 4868 is also available at local IRS offices and many public libraries.

Estimated tax payments are also due -- Remember, April 15 is also the deadline for filing your first estimated tax payment. If you are getting a tax refund and file your annual tax return by April 15, you can have the refund applied to your estimated tax and save yourself the trouble of mailing in a separate payment. Getting an extension for your regular tax return will not grant you an extension on paying estimated taxes; however, if you miss the deadline, you can avoid any interest or penalties by simply increasing the withholding on any paychecks you or your spouse receive as employees.

For more help with the many tax changes that may affect you for the 2007 tax filing season and beyond, take a look at the Toolkit Tax Guide 2008. This easy-to-understand book helps taxpayers--including individuals and entrepreneurs--identify the benefits before them and manage their taxes so they can better prepare their 2007 tax returns, as well as begin planning for 2008. It also includes free income tax preparation of a state and federal return and e-filing with CompleteTax^TM, CCH's easy-to-use online tax return service for individuals. Toolkit Tax Guide 2008 is available in major retail and online bookstores nationwide; via the Business Owner's Toolkit bookstore; or by calling 1-800-248-3248.

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Posted April 2, 2008.