Time’s Up! What To Do If You Need More Time To File Your Taxes
What is a tax filing extension? How can you go about doing it?
March 2013, TruckingInfo.com - WebXclusive
CORRECTED -- According to the IRS, the most serious problem facing taxpayers is the complexity of the tax code. Approximately 7.6 billion hours are spent by businesses and individuals each year on tax compliance - a workload that could keep 3.8 million full-time workers busy by the IRS’ own estimates. And, with an average of over one change to the code per day, the number of pages in the tax code has grown from 400 in 1913 to around 75,000 today.
Throw your long hours as a trucker into the mix, and the potential to miss the filing deadline is very real. However, you can file an extension and avoid penalties.
What is a tax filing extension? How can you go about doing it? Let’s take a look at filing extensions in closer detail.
Filing Extensions Explained
By filing an extension, you’ll have an extra six months to file your tax return. So, if January-April is your busiest time of year or you otherwise have difficulty filing by the normal deadline, you can wait until things slow down before tackling the tax beast.
However, a filing extension only extends the time to file your taxes, not pay them.
“The IRS and the state expect any tax owed to be paid with the extension," says Scott Christiansen, director of tax services at Equinox Business Solutions. AA penalty for non-payment of tax will be assessed by both the IRS and the state for tax payments made after April 15. If the extension is not properly filed by April 15, the IRS and state will assess a late-filing penalty because the return is filed after the deadline.”
Still, it is best to file an extension, he says, even if you end up paying the wrong amount, to avoid a late filing fee (separate from a late payment fee).
A federal extension is typically sufficient to cover an extension on your state income taxes, as well. That said, if you neglect to file an extension with Uncle Sam or your state doesn‘t accept the federal filing extension, your state may penalize you. Also, as with the IRS, your state will want taxes to be paid in full by the scheduled deadline, regardless of whether or not you file an extension.
Filing on Your Own
If you opt to file the extension on your own, you’ll save money. However, you’ll increase the likelihood of improperly filing your extension, which could result in late filing and late payment fees at both the federal and state levels. You’ll also spend a lot more time and, frankly, be bored to tears while reading instruction after instruction and filling out forms.
Also, an improperly filed extension could cost you. According to Equinox's Christiansen: “If the extension is not filed properly, a late-payment penalty will be assessed if tax is owed in addition to a late-filing penalty.”
To illustrate what you’re getting into when you choose to file taxes on your own, with or without an extension, consider the following:
- Instructions for Form 1040 are 214 pages long.
- Tax code regulations, which are issued to provide guidance on the tax code, would stand about a foot tall if you stacked up all the paper.
- The CCH Standard Federal Tax Reporter, which summarizes administrative guidance and judicial decisions related to the tax code, consists of 25 volumes and takes up 9 feet of shelf space
In other words, there is no way you can even remotely begin to understand every tax law you are bound by. That’s not your fault, but the IRS isn’t known for being the most reasonable bunch around!
Hiring a Pro
By hiring a professional tax preparer, you’ll pay more up front but you’ll decrease the chance of an unwelcome meeting with an IRS agent.
You’ll also save time when hiring a professional tax preparer. You’ll hand over some documents and have a conversation or two with your tax preparer. That’s a lot easier than reading through endless instructions and completing form after form.
Professional fees will range from $25 to $300. This range accounts for variances in the level of service. A tax professional may simply file your extension for $25 to $90. After that, though, you’ll be on your own to file your own taxes. For a full-service deal in which a tax preparer files your extension and, later, your income taxes, expect to pay in the $199 to $300 range.
Look for someone with experience and knowledge of the ins and outs of taxes specifically as they apply to trucking.
The Bottom Line
Filing an extension can be a great way to buy time and avoid late filing fees. This can be of particular benefit to those who do not have enough time to file their taxes early in the year.
If you choose to go this route, you can either do so on your own or hire a pro. By doing so on your own, you’ll save money, but increase the risk of a mistake. By hiring a professional tax preparer, you’ll pay more upfront, but will have much less work to do and more peace of mind.
In a nutshell, if you’re a do-it-yourselfer with good math skills, you may want to try filing an extension on your own. Otherwise, sit back and let a pro handle it.
Story updated 4/8/2013 to correct the spelling of Equinox and the first name of Scott Christiansen. We apologize for the errors.