Are There IRS Penalties if I Apply for a Tax Filing Extension on My 2017 Return?

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Are There IRS Penalties if I Apply for a Tax Filing Extension on My 2017 Return?

Tax Day normally falls on April 15. However, due to the timing of Emancipation Day this year, Tax Day 2018 will occur two days later than normal, giving taxpayers 48 extra hours in which to prepare, review, and file the necessary forms. As a result, the 2018 deadline to file your federal personal income tax return is Tuesday, April 17, 2018 – mere days from now. If you, like many taxpayers, require additional time to gather your financial records, you may obtain an extension by submitting the appropriate forms to the Internal Revenue Service (IRS) and possibly your state of residence. However, obtaining a filing extension will not necessarily protect you from IRS penalties – unless you comply with certain requirements. Continue reading to learn more about the financial penalties associated with delinquent tax payments, and be sure to consult a reputable tax preparation service about minimizing your tax liabilities, complying with changes to the law under the Tax Cuts and Jobs Act (TCJA), and saving money by claiming credits, deductions, and exemptions.

Tax Filing Due Dates, 2018 Deadline Extensions, and Failure-to-Pay Penalties

Every April, the nation’s tax lawyers and CPAs are flooded with calls from taxpayers who are worried about tax deadlines, time extensions for filing, and whether penalties can result from a delinquent payment or return submission. With Tax Day now less than a week away, our tax attorneys would like to take this opportunity to set the record straight. In this article, we’ll explain:

  1. How to get a tax filing extension on your 2017 return.
  2. How long the extension gives you to file and pay taxes.
  3. How failure-to-pay penalties are affected by tax filing extensions.
  4. How to avoid incurring penalties for filing or paying your taxes late.

The first two points are also the simplest. If you need additional time for filing your federal income tax return, you must file Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) by April 17, 2018. By filing this form, which requires that you provide some basic contact information in addition to an estimation of your overall tax liability for 2017, you can obtain a six-month time extension, giving you until October 17, 2018 to file your tax return with the IRS.

So far, the process appears straightforward. However, this is precisely where matters can become more complicated, which opens an excellent segue into the second two questions: do tax filing extensions have any effect on IRS penalties, and if so, what can a taxpayer do to avoid this scenario?

As astute readers may have noticed, the foregoing states that Form 4868 can extend the deadline to file your tax return, but makes no comment regarding the payment of estimated taxes. This is not an accidental omission on our part. As many taxpayers are yearly dismayed to discover, receiving a deadline extension to file your tax return does not give you additional time to pay. Therefore, while an extension may enable you to avoid the IRS’ failure-to-file penalty, which is otherwise imposed for returns submitted after the April deadline, you could still incur separate failure-to-pay penalties. It is critical for taxpayers to understand this distinction.

The failure-t0-pay penalty is generally 0.5% of the unpaid tax. This penalty, which will begin to accrue April 18 (though in most years, April 16), is applied toward each month, whether full or partial, that the taxpayer fails to pay his or her estimate tax liability. However, it may be possible for the taxpayer to avoid incurring this penalty by taking all three of the following actions:

  1. Timely requesting a time extension to file a 2017 tax return.
  2. Paying 90% or more of the 2017 taxes owed.
  3. Paying whatever balance remains by the extended (October) due date.

Of course, this raises a crucial question: without having filed yet, how does the taxpayer determine how much he or she owes to the IRS? The disappointing answer is that, absent a reasonably detailed and accurate draft of the return, there is little the taxpayer can do to correctly calculate his or her tax bill. Indeed, many tax preparers use contractual clauses to limit liability when a tax return is put on extension for delinquent payment penalties and interest.

Tax Preparation Services for Help Filing Your 2017 Tax Return

It is absolutely imperative that you work with a skilled, knowledgeable, and experienced tax attorney if you have any questions or concerns about filing or paying your taxes this year, whether at the local, state, or federal level. Guidance from a trustworthy tax professional can shrink your tax bill by minimizing penalties while ensuring that you take advantage of every tax break for which you qualify.

If you need help with a tax filing extension, business tax preparation, divorce tax issues, Bitcoin tax issues, tax audit concerns, or any other matter pertaining to civil or criminal tax laws for business entities or individuals, look to the award-winning attorneys and CPAs at the Tax Law Offices of David W. Klasing for zealous representation and comprehensive support. For a reduced-rate tax consultation, contact us online, or call our law offices at (800) 681-1295. Get the professional tax help you need – before it’s too late.

Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.