Wednesday, April 12, 2006

Filing Extensions

The following helpful article comes from H&R Block.

What to Know About Extension Filing

Taxpayers are increasingly buying time by filing for an extension. As the April 17 tax deadline looms, the IRS expects at least 10 million taxpayers to file extensions this year.

Reasons for seeking an extension vary. Many taxpayers are intimidated by the ever-growing complexity of the tax code. Others are held up by late or missing documents. Still others face major life changes, such as a divorce, a move or a new job, that make timely filing more difficult.

Know the Rules

To avoid penalties, interest and other headaches, taxpayers who need to file an extension should pay close attention to IRS rules. Extensions take time and preparation to calculate. However, with assistance from a tax professional, online programs or software products, extensions can be completed easily and filed correctly, buying the time needed to complete the tax return.

According to H&R Block, the important facts to remember when considering an extension include:

  • Notify the IRS – If a taxpayer files an extension with the IRS (Form 4868) he or she will have until Oct. 16 to complete their tax return. (Taxpayers living and working outside the US have an automatic two-month extension to June 15. They can request an additional 4-month extension by filing Form 4868.)

Preparing Form 4868 isn’t always easy, so the taxpayer should plan ahead. Using a tax professional or a digital solution (online or software) may simplify the task. They may also visit www.hrblock.com to file an extension electronically or to find the nearest year-round H&R Block office.

  • File later, pay now – The extension to file will not give taxpayers more time to pay their tax bill. Taxpayers should estimate their tax liability and pay as much as they can by April 17. Underpayments are subject to penalties and interest.

  • Use your credit card – The IRS accepts most major credit cards, so taxpayers can charge their taxes owed as part of the extension. There is no IRS fee for credit card payments, although card processors may charge a convenience fee. When H&R Block clients visit an office to file their tax return and find they have a balance due, the standard card-company convenience fee of 2.49% is eliminated if they choose to pay by a Visa® check card. If clients choose to pay with a Visa credit card, the standard 2.49% fee is reduced to 1.99%. To receive this special Visa Credit Card offer, payment must be made in the tax office through www.pay1040.com/block. There are also other credit card offers available via hrblock.com Shouldn’t we mention the other offers?

  • Year-round Tax Professionals– Using a tax professional to complete a late return can save the taxpayer time and may save them money by identifying deductions or credits. More than 4,000 H&R Block offices nationwide are open year-round.

  • File if you can, even if you can’t pay – If taxpayers complete their returns but are unable to pay the tax due in full, they should file their returns by April 17, and submit with as much of the tax due as possible. The IRS will send the taxpayer a bill or notice for the balance due. Installment agreements are another option. The IRS charges a $43 fee to set up an installment agreement. It will also charge interest and, sometimes, penalties on the unpaid balance.

  • Extend the extension? – Beyond the first extension of October 16, the IRS says it is unlikely a taxpayer may receive another extension. There are exceptions for U.S. taxpayers living out of the country. Taxpayers should consult the IRS or a tax professional if they have questions.

Last-Minute Help is Available from H&R Block. For more information, please visit:

http://www.nationaltaxadviceday.com

1 comment:

Justin said...

I would note that H&R Block is waiving the 2.49% fee for paying your taxes with a credit card so that you will use H&R Block's service. If you are not using H&R Block, you'll pay that extra 2.5% for paying with a credit card, which is really bad advice.

In fact, H&R Block's using that as a tax tip really calls into question all of their tips.