Individual tax returns are due April 17, 2018. However, many traders, investors and other taxpayers may not be fully ready to file a tax return by the due date. If you are one of them, make sure you file for a tax extension.
You might be waiting on a corrected 1099-B forms, waiting to receive a K1 from a business entity you own or have invested in, trying to figure out how to handle the wash sale rules or just want more time to weigh your options and make better decisions. The good news is, the IRS will allow you to have an automatic 6-month extension to file your tax return. Your new tax deadline will be October 15, 2018.
Here are some tips for filing a tax extension:
- To be eligible for an extension you must file tax form 4868 no later than April 17, 2018. The extension is only for the time allowed to file your return, but not an extension of time to pay any taxes owed.
- Avoid penalties and interest. The IRS can impose 3 major type of penalties for overdue tax debt: underpayment penalty (4%), late payment penalty (0.5% per month up to a maximum of 25%) and late filing penalty (max 25%). Make sure you pay any amounts owed prior to April 17, 2018 to avoid these penalties.
- You’ve got payment options. If you cannot pay in full by the due date then make a partial payment, ask for an installment plan or use your credit card to pay your tax bill. Do this before the tax due date even if you are or have filed for a tax extension.
- Avoid last minute errors. Make sure all social security numbers entered on the tax extension forms are correct. Also, make sure your bank account and routing numbers are correct if you have any amounts paid directly from your bank account.
- MTM Election. If you plan to make MTM election, filing an extension does not allow you to make the election later. If you want to elect MTM then you need to attach the election to your 4868 extension form and file before April 17.
- IRA Contributions. All contributions to an IRA must be made by April 17 to be included in your 2017 tax return. Filing an extension to file does not give you the right to delay any IRA contributions intended for the 2017 tax year.
- FBAR Reporting. If you have a requirement to report your foreign financial accounts, you need to file a separate tax extension. Form 4868 does not cover extension of time for filing for FBAR or Fincen reports.
- Talk to a tax professional. You do not need to do this on your own. A tax professional can provide you with more tax planning ideas prior to the tax deadline.
For more information or further assistance reach out to OTA Tax Pros.