Filing an Extension Doesn’t Postpone Payment

Washington, DC (April 16)—Tomorrow is tax day and all across the land good reasons and poor excuses are being proffered by those who have not yet submitted a return. For some, the reason is an unexpected family emergency, or a sudden influx of work requiring night and weekend hours. Others fear finding out they owe a tax bill they can’t pay. Or maybe it’s just a question of procrastination. 

The sad truth is that if you don’t file by April 17, it’s probably going to cost you. The IRS charges a late filing penalty of 4.5 percent of the amount due for each month or part of a month your return is late. There is a minimum penalty of $100 or the balance of the tax due on your return.

And the hurt doesn’t stop there. A common misconception is that the IRS is giving you additional time to pay your tax liability—not so! The extension is for filing your return, not for paying whatever you may owe; that’s still due tomorrow. Late payment results in an additional penalty on top of the penalty for late filing. This is usually 0.5% of any tax not paid by the due date and is charged for part of a month that the tax is unpaid. The maximum penalty for both late payment and late filing is 25 percent.

If you haven’t completed your return, you’re probably estimating what you owe, so keep in mind that it’s better to estimate on the high side. If you over-estimate, you’ll get a refund, but if you haven’t paid at least 90 percent of the final tax bill by April 17, you’ll wind up owing a penalty. Don’t forget about automatic withholding and estimated payments you’ve already paid to the IRS—they will count toward this 90 percent requirement.

So, where does a tardy taxpayer start? To file an extension, go to www.irs.gov and download Automatic Extension Form 4868. Fill it out and send it in along with a payment of the amount you estimate that you owe. Those who haven’t filed an extension for a few years should be aware that it is no longer possible to file an extension using the IRS TeleFile system. TeleFile, a telephone-based service used to file extensions and other tax-related forms, was discontinued in 2005.

Once you’ve submitted Form 4868 and your estimated payment, you have until October 15, 2007, to submit your return. As repeat extenders know, in the past it was necessary to file for a four-month extension, followed by a two-month extension. Now, one form covers you for six months. Who says the IRS never does anything to make your life easier?

Once you’ve filed that extension form and sent in a payment of approximately what you owe, take a deep breath and get some help! If taxes aren’t your thing, you join the estimated 60 percent of taxpayers who hire a paid preparer every year to make sure to comply with the Tax Code and take advantage of every exemption, claim and deduction to which they are legally entitled.

Enrolled agents are tax professionals licensed by the US Department of the Treasury to represent taxpayers before all administrative levels of the IRS. While attorneys and certified public accountants are also licensed, only enrolled agents specialize exclusively in taxes. Enrolled agents are required to complete many hours of continuing education each year to ensure they are up-to-date on the constantly changing Tax Code. To find an enrolled agent in your area, go to www.naea.org and click on “Find an Enrolled Agent.”

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