1. Did you request an extension in time?
If somebody was late submitting an extension, the extension in all probability isn’t legitimate, stated Lisa Featherngill, the nationwide director of wealth planning at Comerica Bank. “This isn’t a problem if they are due a refund,” she says. “However, if they owe tax, they can be assessed a late filing penalty.”
Technically, stated Featherngill, that is the Failure to File Penalty, and it’s 5% of the unpaid tax for every month (or partial month) {that a} return is late, as much as 25% of the unpaid stability.
Note: A legitimate extension must be postmarked by the due date of the tax return, or April 18 for 2021 returns.
2. Did you estimate and pay any taxes owed by the April deadline?
Taxpayers who request an extension to file their federal taxes should estimate and pay any taxes owed by the April deadline, stated Jean-Luc Bourdon, CPA/PFS, the founding father of Lucent Wealth Planning. “That estimate may or may not be correct,” he stated. “So, when the taxpayer’s tax return is later prepared, they may find out that they owe more than they paid—and face penalties.”
Given that, Bourdon stated it’s at all times finest to arrange an prolonged tax return as quickly as doable to know for positive if there’s a tax shortfall. And if there’s a tax shortfall, to restrict penalties, it’s higher to pay it earlier than later, he stated.
Meet Our CPA and Tax Expert: Jean-Luc Bourdon
3. Do you make quarterly estimated tax funds?
Taxpayers who make quarterly estimated tax funds ought to take note of their current-year estimates, stated Bourdon. “Estimated payments are based on the prior year’s tax return,” he stated. “So, when that tax return goes on extension, the quarterly estimated payments might get forgotten.”
Scroll to Continue
It is, stated Bourdon, a standard oversight.
Another problem: The estimated tax funds will not be adequate to keep away from underpayment penalties. Here once more, stated Bourdon, it’s finest to file the prolonged tax return as quickly as doable to get good estimates for quarterly funds.
Of be aware, if taxpayers on extension later discover out they’ve underpaid their quarterly estimated funds for the present yr, they could be capable to meet up with payroll withholdings or different tax withholdings from, say, retirement accounts if relevant, stated Bourdon.
4. Don’t postpone submitting your tax return to the October deadline
There’s no prize for submitting on the final minute and it typically causes a lot frustration and missed planning alternatives, stated Bourdon.
5. Be a superb consumer
Over the previous couple of years, the IRS and the advanced tax atmosphere have been exhausting on tax-preparers, stated Bourdon. “There’s also a shortage of tax talent,” he stated. “Consequently, good tax pros don’t need difficult clients and get to be choosy.”
In reality, a few of them fireplace their worst purchasers annually, he stated. “To avoid receiving a ‘disengagement letter,’ don’t be a last-minute filer,” stated Bourdon. “In general, get your complete tax information to your tax-preparer as early as possible. Thank you cards and hugs are good ideas too.” Read Extension of Time To File Your Tax Return.
More Tax Advice From Our Partners at TurboTax.com:
Editor’s Note: The opinions expressed on this article are these of the authors. The content material was reviewed for tax accuracy by a TurboTax CPA skilled.
Source: www.thestreet.com”