The tax season has come and gone, and every year it leaves a few people very happy, and just as many impossibly annoyed. Taxes are a necessary evil to the type of government the United States has. Procrastinators are especially bothered by tax season. By early April, they’re still deciding on who they are going to go with this year.
If tax season came down to the wire in 2014, perhaps an extension would be smart. Individuals that have gone through an extension for this year should know what they need to do next (or others who are interested next year). Carmines Robbins and Company PLC is a taxation accounting firm. Firstly, an extension must be filed. Individuals looking to avoid even one piece of paperwork are not so lucky. The extension is very short- usually just a few pages. A standard tax extension offers six extra months to file. Accounting in Newport News VA can often file it so the new due date is December 31 of that year.
Extensions for Returns
Extensions are not required for people that are getting a tax return. They have upwards of three years to clean those funds. After three years, the money will be taken in by treasury collections and will be considered a donation. On a legal basis, this rule arises from the statute of limitations. Extensions are only relevant for people that owe tax money.
What is the Penalty?
A tax extension wouldn’t be all that important if there was no late penalty. Unfortunately, there is. The main purpose of filing a tax extension is to avoid this late penalty fee. The late penalty is 5% of the total amount owed. This 5% is added every single month. For example, an individual that owes $1000 will have to pay $1050 if they file in May. The late penalty continues adding an additional 5% for every subsequent month. There is no stated date of when this ends, which is why some people that pay taxes years later are paying back fees in the thousands of dollars.
A tax extension is obviously a smart move. It provides a buffer period of an additional six months, as well as avoidance of substantial penalty. Visit the Accounting in Newport News VA office to learn more about extensions for the next year.