IRS Tax Problems, Tax Audit, Tax Audit Help

IRS Deadlines and Extensions

September 21, 2012 - IRS Tax Problems, Tax Audit, Tax Audit Help

Tick, Tock, Tick, Tock! Have I ever told you about the time line that the INTERNAL REVENUE SERVICE is bound by? There are due dates. There are many of them. Most of us are calendar-year taxpayers. That means our tax year ends December 31st. And when we file an individual income tax return, a Form 1040, that is due April 15th of the following year. At one time the 1040 was due March 15th, but so many people asked for extra time the due date was changed to April 15th. Even today, many people still ask for extensions. Not too long ago the extension gave us two additional months to file the return. And so many people asked for a second 4-month extension that the 2nd extension was eliminated and IRS now gives us one six-month extension. This means that if you REQUEST an extension of time, your April 15th due date has been extended to October 15th. An extension of time only gives us time to file the paperwork. It does not give us any more time to pay our tax. The tax is still due by April 15th. If on April 15th you think you will owe tax with your tax return, you can make a payment with your extension and still get more time to finish your paperwork to file a correct and accurate tax return. If you wind up owing tax when you file that extended return, the extension will not be valid. Interest will be charged from April 15th until your taxes are paid in full. Penalties will also be assessed for late-filing and for late-paying your tax. This is not a pretty picture. If you have a business and file a corporate return, whether it be a “C” Corporation or an “S” Corporation you may have a calendar-year entity or a fiscal year entity. Both “C” and “S” corporations have income and expenses. They have Income Statements and Balance Sheets. They have Schedules of Depreciation for assets like equipment and buildings. A “C” Corporation files an 1120 return, can have a tax liability on income greater than expenses, and the corporation would pay that tax. If you elect for that corporation to be treated as a small or “S” corporation, it files an 1120S return instead and the income greater than expenses, or profit, passes through to the shareholder (or shareholders) on form K1. The shareholder includes their share of the corporate profits on their 1040 tax return along with their other income. To keep it simple, if the corporation uses a calendar year, then that corporate return is due March 15th. And, like a personal 1040 return, can elect a 6-month extension that for the corporation ends September 15th. Whether business or individual, you must request an extension. They are not automatic. And they are only good for filing the paperwork, the tax returns.. Any taxes due must be paid by the due date to avoid interest and penalties. Have you ever heard the expression, “The shoemaker’s son goes barefoot.”? Lots of times I feel like the shoemaker’s son. My own tax returns are always on extension. Could I file them early and avoid the rush? Sure, but what would be the fun in that? I must really love the adrenaline rush. I am all about time management. But last week was truly “Just in Time! Management.” Did you ever stay up late studying for an exam? Did you ever pull an “all-nighter” where you didn’t get any sleep at all? I did. I did in college and I did last week, too. In some ways I am a lot like some of my own clients. I was busy finishing clients’ business returns and getting ready for an out-of-town business trip, and I found myself staying up all night to file my own business return before leaving for the airport for my business trip. tick, tock, tick, tock…. If you miss the extension deadline that return is just flat out delinquent. And I cannot be late and stay in business for you! So I missed a little sleep. It is still September. But October is right around the corner! Like many of you, I, too, must finish my personal 1040 return before October 15th. Even though we have a deadline to meet, I encourage you to take the time you need to do a good job of getting your figures together. It is so much better and easier to file correctly to begin with. Remember, you are signing under penalty of perjury that you are filing a correct and accurate return. If you do later find you need to amend a tax return, there’s a form for that. And the 1040X Amended Return has its due date too. Often you may file what you think is an accurate return only to get an additional form that you forgot about or didn’t even know you should have waited for. This often happens when you are the heir of someone who has passed away and you inherit something taxable. In that instance you will owe tax with that amended return. It is so much better to file that amendment than to wait for the IRS to tell you about your additional income and tax due. If you wait too long to file on your own, the IRS will start that ball rolling. Maybe you find you left something off that is to your benefit, that would lower the tax you already paid, that would generate a refund for you. Here is where the timing is really important. You only have so much time to file that request for refund. Generally you must file the 1040X within three years of the date you filed that original return. This due date can be tricky, so be sure to consult your professional for advice on your 1040X. Well, back to extended 1040s due October 15th. Since you and I will be getting our 2011 tax return information in order, may I suggest it is also a good time to start organizing our 2012 (this year we are in) data? Do you hear it? tick, tock, tick, tock … To our lowest legal tax, Nellie Williams, EA

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