Investment & Financial Articles
Title: Tax Filing 101: It's Never Too Early To Procrastinate
Author: Wayne M. Davies
Article:
For all you procrastinators out there, here's a nuts 'n bolts
guide on how to legally postpone the filing of your Year 2002
income tax returns.
When it comes to putting things off, you can never plan too far
ahead!
In many cases the IRS allows you to file a 'no-questions- asked'
extension form. Which particular form you file depends on what
type of entity your business happens to be.
CORPORATIONS: Whether you are a "C" Corporation or an "S"
Corporation, you must file Form 7004 by March 15. Doing so
grants you an automatic 6-month extension for filing Form 1120
("C" Corp) or Form 1120S ("S" Corp). So now you have until
September 15 to file your corporate income tax return.
Note: Since March 15 falls on a Saturday this year, you actually
have until Monday, March 17 to either file the corporate income
tax return or file the extension.
By the way, this is true of any tax due date: if the due date
falls on a weekend or legal holiday, then the return is due on
the next business day.
To get a copy of Form 7004, click here:
http://www.irs.gov/pub/irs-pdf/f7004.pdf
http://www.irs.gov/pub/irs-fill/f7004.pdf
Note: all the links in this article take you to the IRS forms
website. If "irs-pdf" is in the link, then you will be taken to
a pdf file that can be saved to your hard drive or printed out;
then you can complete the form by hand and mail it to the IRS.
If "irs-fill" is in the link, you will be taken to a pdf file
with fill-in-the-blank capabilities, enabling you to complete
the form online and then print it out immediately, without
having to complete the form by hand.
PARTNERSHIPS: You need to file Form 8736 by April 15. This
obtains a 3-month extension to file Form 1065.
http://www.irs.gov/pub/irs-pdf/f8736.pdf
http://www.irs.gov/pub/irs-fill/f8736.pdf
LIMITED LIABILITY COMPANIES (LLC): Same as partnerships -- File
8736 by April 15 to get a 3-month extension to file Form 1065.
(The LLC is a cross between a corporation and a partnership.
Legally, the LLC is similar to a corporation, offering limited
liability to the owners. For tax purposes, the LLC is treated
like a partnership.)
SOLE PROPRIETORSHIP: You need to file Form 4868 to get an
automatic 4-month extension to file your personal income tax
return.
http://www.irs.gov/pub/irs-pdf/f4868.pdf
http://www.irs.gov/pub/irs-fill/f4868.pdf
Now, before you start extending to your heart's content, please
keep the following guidelines in mind.
EXTENSION TIP #1:
Never forget the mantra of all tax extension forms:
The extension to file the return is NOT an extension to pay any
tax due. It's only an extension for the filing of your tax
return.
In other words, do not view the extension as an opportunity to
legally postpone the payment of your tax.
So if you have a balance due on the return, then you must still
pay the tax by the original tax return due date. If you file the
extension but do not pay the balance due on time, then you will
pay penalty and interest for late payment of tax. (You will
legally avoid the penalty for late filing, however.)
So what's the point in filing an extension if you still have to
pay the tax?
Three possible scenarios -- first, some folks get most of their
"
tax stuff" organized and are able to get enough of their return
done to get the big picture: "Do I owe or am I getting a
refund." You do the calculations, see where you stand, and if
you owe, send in the extension form with a payment that's pretty
close to the final figures.
You may have a few deductions that you need to research, one
last shoebox to peruse. You need more time, that's all.
Second, you're running way behind on tax matters this year. Hey,
it happens! There's no way you're going to get the return done
on time, and you know you'll probably owe, so, be sure to file
the extension, even if you don't know how much you may owe or
even if you can't make a payment with the extension. The reason?
Because there are penalties for late filing and penalties for
late payment of tax. By filing the extension, at least you avoid
the late filing penalties.
In short, by filing the extension, you can save yourself some
money!
The third scenario is even more common -- you know you're
getting a refund; you always get a refund. Maybe you're
self-employed and your spouse has a W2 job, and the spouse's tax
withholdings are always enough to cover both of you. And you're
in no hurry to get the refund.
Which brings me to:
EXTENSION TIP #2:
If you are getting a refund on your personal return, you have 3
years to file the return to claim the refund, without any fear
of a late filing penalty.
That's right. As long as you file your return within 3 years of
the original due date (for Year 2002 returns due April 15, 2003
-- that would be April 15, 2006), you'll get your refund and
there is no penalty for "filing late" -- even if you file after
the extended due date of August 15.
Bottom line: if you think you may owe, if at all possible, do
enough calculating to send in a payment with the extension; if
you're getting a refund, still send in the extension (just to be
safe), but relax, you've got plenty of time to get your money
back (assuming you didn't need it yesterday!).
Oh, one more thing:
EXTENSION TIP #3:
This article only deals with federal extension rules. State
rules vary considerably, so be sure to check with your state's
tax department or your local tax professional to get the scoop
on the extension rules for your particular state.
Some states simply piggyback off the federal rules. Others
don't. So be careful here or you could be penalized severely for
assuming that your state's rules are the same as the feds.
Many Happy Returns!
About the author:
Wayne M. Davies is author of the new eBook, "The Tax Reduction
Toolkit: 29 Little-Known Legal Loopholes That Will Reduce Your
Taxes By Thousands (For Small Business Owners and Self-Employed
People Only!) Don't file another tax return until you visit:
http://www.YouSaveOnTaxes.com/toolkit.html
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