Buzz
If you're working with a CPA or an accounting firm for your taxes, you might have recently gotten some unsettling news: due to various factors, including the recent government shutdown and the new tax regulations, many tax preparers are behind and not all tax returns will be filed on time. As stated by The New York Times:
“This is the most complicated tax season ever,” said Ross A. Riskin, a certified public accountant and assistant professor of taxation at the American College of Financial Services.
The I.R.S. expects to receive over 14.6 million extension requests this year, nearly 10% of all filers. This would mark the largest number of requests in a single year, according to an I.R.S. spokesperson, Eric Smith.
If your CPA or tax preparer has told you that your taxes may be delayed, here's what you should understand:
Requesting a tax extension is not as serious as it may seem
The first time I had to ask for an extension—because I was a new freelancer who tried to do my taxes on my own and quickly realized I was in over my head—I felt like I had failed. How could I miss such an important deadline? Would the IRS be angry? Would I face a lot of penalties?
The answers to the last two questions are, at least, no and no. The IRS won't shame you for requesting an extension (after all, how would they even do that?), and you won’t incur a penalty for simply filing the extension. You just need to submit a simple form, pay any taxes you believe you owe, and you'll have an extra six months to finalize your tax return.
You still need to make your tax payment by April 15
When submitting your extension form, you'll need to estimate the taxes you owe, as well as the amount you've already paid throughout the year. If you think you owe more than what you've paid so far, it's a good idea to pay the difference when you file the extension form.
If you're thinking, “But the reason I’m filing for an extension is because I don’t know how much I owe,” you can skip the payment—but be aware that you may face interest and penalties later on.
Here’s how the IRS lays it out:
While you're not required to pay the estimated amount of tax due with your extension request, Form 4868 does not extend your time to pay taxes. If you don’t make the payment by the original deadline, you’ll incur interest and possibly penalties. For more information, refer to Interest and Late Payment Penalty on page 2. Any payment you send with your extension application will be counted as a tax payment.
Your tax preparer can help you estimate the amount you may need to pay to avoid penalties. Keep in mind, if you end up paying more than you owe, you’ll get that extra money back when you file your taxes, as part of your refund.
You must also complete most IRA and HSA contributions by April 15
If you plan on contributing to your HSA or IRA for the 2018 tax year, these contributions need to be made by April 15. Filing for an extension does not grant you extra time to contribute to these accounts.
There is an exception if you are a freelancer or small business owner contributing to a SEP IRA. In this case, the extension applies to your SEP contributions, giving you extra time to add funds to those accounts.
Your refund will be issued once you file your tax return
If you’re eagerly awaiting your annual tax refund, here’s the good and bad news. The bad news: you won’t get your refund until after filing your taxes. The good news: once you file, the IRS should process your refund just as quickly as usual, even in this particularly complex tax season.
As The New York Times reports:
The I.R.S. has stated that refunds are expected to be processed on time. Typically, this means nine out of ten refunds
are issued within 21 days
, provided the return was filed electronically and the refund is directed via direct deposit.
You can always track the status of your refund with the IRS to see where it is in the process and find out if it's on track to arrive soon.
Don’t overlook state taxes
Each state has its own rules for filing tax extensions. If you're working with a tax preparer for your state taxes and they anticipate missing the deadline, they should give you guidance on how to file for a state tax extension.
If you rely on a CPA or tax preparer to file your taxes, how has the 2018 tax season gone for you? Were you able to get everything filed on time, or do you think your return might be delayed? Accounting firms still have a bit over a week to wrap things up, so this could turn out to be a non-issue—but if you end up requesting a tax extension, try not to stress about it too much.
