There are many taxpayers who experience great angst to learn that their return cannot be filed by the due date of April 15 and need to file for an extension of time to file until October 15. There are other taxpayers, for whatever reason, the filing of an extension is a regular, annual occurrence.
First, we need to discuss a few truisms: (1) If filing an extension by paper form, be sure to send the extension by either U.S.P.S. certified mail with a return receipt, by U.S.P.S. Priority Mail with a tracking receipt, or by other IRS announced acceptable means of filing to prove delivery to the IRS; (2) E-filing the extension is often easier to prove when dealing with the IRS; (3) if the balance due is not paid by the original April 15 due date, the IRS will assess the taxpayer a late payment penalty of 0.5% per month or any portion of a month (capped at 25% max) as the extension is only to file, not to pay; (4) if you do not have the funds to pay the balance due owed to the IRS, be sure to file your tax return by the due date (or extended due date) to avoid the 5% per month or portion of any month (capped at 25% max) IRS penalty for failure to timely file a return.
The Ugly:. For whatever reason, you decide it is in your best interest to file for an extension and you become an identity theft victim. Further explanation as to why this is ugly is self-evident. The IRS recommends that taxpayers file as early as possible to minimize ID theft.
The Bad:. You file for an extension and do not pay the expected balance due the IRS by April 15 nor by October 15. The IRS will assess you the .5% penalty for the months beginning with April through the month that your tax liability is paid in full, not to exceed 25%. Since your return was not filed by October 15, the IRS will assess the 5% penalty for failure to file beginning with the month of October (portion of months get assessed the penalty) and for each month thereafter until the return is filed, not to exceed the 25% cap. Thus by filing for an extension, the failure to file penalty begins with the month of October rather than April.
The Good:. You file for an extension and after filing your return, but before the extended due date (in other words, between April 16 and October 15), you discover that the return filed contained an error. Normally such errors require that an amended return be filed after the extended due date. However, you can file a superseding return instead. Amended returns are filed after the return’s due date has passed. An amended returns does not become the return for the year (as does a superseding return). Superseding returns essentially bump out any prior return, as long as it is filed on or before the due date (including extensions). An example of where filing a superseded return to your advantage is where the original return is filed to obtain a refund or loss carry back based on an estimate (fully disclosed) used in the Form 1040 as early as possible, and then the superseded return is filed with the confirmed correct numbers replacing the estimated numbers and having the subsequent return be treated as the original return for the tax year.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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