File a 2016 tax extension7/9/2023 In this scenario, the taxpayer would be hit with a failure to file penalty not to exceed $10,000. The worst part is that Joe thinks everything is ok and is unaware that his extension has been voided. Joe will be hit with a failure to file penalty (IRC §6651) of 5% a month for every month tax return is not filed not to exceed 25%. Joe files for an automatic 6-month extension with the IRS and does not make a payment with the extension. Joe currently does not have the money and chooses to file an extension instead of filing his tax return. Come tax filing time, Joe owes $40,000 in income taxes to the IRS. If this happens taxpayer will be subject to the failure to file penalty which is 5% of the unpaid tax a month for every month the tax return is not filed not to exceed 25%.ĮXAMPLE: Joe the plumber is self-employed and has not been making estimated tax paymentsthroughout the year. ![]() TRAP- The IRS can VOID your extension! If the IRS determines the taxpayer’s estimate was not reasonable the filed extension will be voided (as if the extension was never filed). ![]() Beware of Trap! Remember, an extension is an extension of time to file your tax return, not to pay the tax! Therefore taxpayers need to estimate the amount of tax that will be owed and submit payment along with the extension. Important: the taxpayer must select “Extension” for purposes of receiving an automatic 6-month extension to file.
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