Do you think you will not be done with your taxes by the 15th if April? No problem, you can file an extension. But before you do so, there are some things which you should know. Your chosen tax accountant Orlando will guide you more, but here we quickly present you with the details.
When is the last date for filing an extension?
If you cannot prepare your tax return and fill it out within the deadline, you can file an extension. You have until the 15th of April to do so. If your application is approved, you have six more months, i.e., till the 15th of October to sort all your paper work and gather your records.
Please note that hailing an extension only gives you more time for filling out the return. You still will have to pay your taxes before the 15th of April. Estimate your taxable amount and pay that. Your accountant Orlando will help you in calculating this.
An extension is filed on Form 4868. We recommend that you should file this electronically for more convenience. Should you do so, the IRS will get back to you in a couple of hours. Paper filing means later response times.
What is the purpose of an extension?
As already mentioned, an extension does not waive your taxes or provide you with more time for that. It is only for the paperwork, and estimated taxes still have to be paid. Not doing so will subject you to late payment fees and penalties.
What penalties will you have to face?
The penalty for not filing is more that not paying your taxes. Generally, this is around 5% of the unpaid taxes for every month. The maximum value of this penalty is 25% of the unpaid tax amount. If you fail to pa, penalty is incurred at the rate of 0.5% per month.
Since the penalties depend on the amount of your unpaid taxes, you can reduce them by paying most of your taxes before the due date. If your estimates are correct, and you may over 90% of the tax bill, you will not have to bear any more penalties.
What if you are not granted an extension and you still file late?
If you do not file your taxes and also do not apply for an extension, you will have to face greater penalties than the ones mentioned above. Not applying for an extension and paying you taxes after two months of the due date or applying for an extension and still paying your taxes two months after the due dates lead to a penalty worth $135 or 100% of your unpaid tax amount, whichver of these is smaller.
Are there any special circumstances in which penalties are exempted?
If you are going through a financial catastrophe, you may not have to bear any penalties. For instance, if a natural disaster occurs, the IORs may decide to be lenient with you.
What Can You Do with Your Tax Refund?
You have been paying all your taxes in a timely manner, and instead of you owing to the IRS, now they owe you back. Great, you will be getting a refund this year and must have availed all your tax deductions properly. Probably, a reputed accountant Orlando would have helped you with this because taking their help does mean that you can cash onto all applicable deductions and tax credits.
So now that you have a refund, what do you do with it? Here are some really good ideas.
Learn an important lesson
Refunds sound great, but this is somewhat marred when you regard them as interest free loan which you give to the government. If you had been estimating your taxes accurately throughout the year, this will not have been so. As a lesson, this year adjust your estimated tax payments and pay only the due amounts. This way you will not have to wait for your refund the next times.
Use refunds for paying next year taxes
Taxes have to be paid every year. So if you have a refund, you could just save it and pay it as tax for the next year. You can also use it for your estimated tax payments which have to be made on a regular basis. If you cannot figure out the amount, your chosen accountant Orlando can determine estimated taxes for you.
Contribute to your retirement savings
Have you set up an IRA or 401 (k) account for your retirement? You should have because contributions to these accounts are utilized as deductions, which means paying lower taxes. And this is not just it, you are securing your retirement as well.
Do you want a refund as well and spend it in any of the above ways? Take advice from an accountant in Orlando, and if they cannot get you a refund, they will still ascertain that you pay the lowest possible amounts.
Save for educational purposes
Do you want to enhance your degree and improve your qualifications? Great, but you must already be aware of how expensive colleges can be. No problem, try saving your tax refund, and you will have soon accumulated enough to pay your basic educational fees. And when you start doing this, you can include all these expenses as deductions. Great, is it not?
Save for future medical expenses
You never know when you may fall ill. Should this unfortunate incident happen, not only will you have to bear your medical bills, but you will also be out of work, and might have trouble in meeting your daily expenses. In such a scenario, if you have ample savings, you will be able to get through. So start contributing your tax refund into a health savings account.
And by the way, you may already have health insurance, but there are times when insurance does not pay all your bilks or provide you with necessary coverage.
If you need more information about our Orlando accounting and tax services, please contact us at 407-344-1012. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt.