Tax filing deadline is approaching for those who requested a deferment: what you need to know

If you're one of the estimated 15 million U.S. taxpayers who asked the Internal Revenue Service (IRS) for an extension to file their taxes in April, the time to submit returns and transfer funds is almost over. Edition USA Today tells you what to remember.

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The deadline for filing federal taxes after renewal is October 15.

By submitting the 4868 form before April 15, you have given yourself an additional six months to file and pay taxes. If you miss the deadline for October, you are likely to face a huge fine.

According to IRS statistics, this year more than 10% of taxpayers requested an extension. As a rule, the reason was that taxpayers needed more time to collect the necessary documents, or their tax situation was complicated and required additional preparatory work. On top of that, taxpayers are exploring the nuances of the new tax code that President Donald Trump signed in December 2017.

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“There are many more extensions recorded this year due to the complexity of the Tax Cuts and Jobs Act,” says Bill Smith, managing director of CBIZ MHM National Tax Office.

“In October, the main thing is to make sure you have all the documents. If you are missing something, you will have to find it very quickly because time is running out,” he added.

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Some taxpayers mistakenly believe that a six-month extension provides an extra six months for taxes, says Lisa Green-Lewis, a securities and tax expert at TurboTax.

“This is a misconception, and we always emphasize that this is simply additional time for collecting documents. The IRS wants you to pay 90% of what you owe by April 15,” she says.

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Taxpayers who owe the IRS had to send a payment equal to the estimated amount of taxes before the usual tax deadline in spring. Otherwise, you can get a penalty for underpayment.

What is the penalty

If your tax return shows that you did not pay at least 90% of the tax invoice before April 15, the IRS will charge you a penalty of 0,5% per month for the unpaid amount until the rate reaches 25%, Green Lewis says. In other words, it may take about four years to reach this limit. If you have not filed a tax return, then you will be charged a higher penalty. The IRS charges interest on the amount you owe, although the rate changes by a quarter.

A proper assessment can be difficult for taxpayers who have not collected all of their documents by the April deadline. Smith says that some tax inspectors who wanted to help clients avoid punishment could overestimate clients' debts.

“If you overpaid, you'll get it all back when we file your return,” he says.

“That's not the worst thing — the worst thing is that people are now delaying filing or getting the information they need” to apply by Oct. 15.

What happens if you miss the deadline?

According to tax experts, taxpayers who did not submit documents before October 15 may face even higher fines. The IRS will impose a fine on you of 5% per month for an unpaid tax account for up to five months, but no more than 25%. If you encounter penalties for both underpayment and inability to file an application, the IRS will charge a higher fee of 5% until this penalty reaches 25% in five months, but Smith notes that after this the penalty for underpayment will continue act at the level of 0,5%. per month.

If you have to pay a fine, the IRS will calculate it after you file your return, says Eric Bronnenkant, Head of Betterment Financial Services Tax.

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"Pay what you owe and let the IRS send you a bill for the interest you owe," says Bronnenkant.

If you cannot pay your debts right away, the IRS will develop a payment plan.

Retirement savings

Some business owners and self-employed workers may still be able to deduct pension savings for the 2018 tax year if they have a simplified individual retirement account for employee pensions, also known as SEP-IRA, which is intended for these employees.

SEP-IRA allows you to make contributions for the previous year already 15 numbers.

If you are eligible to participate in the SEP-IRA, but you don’t have one, “you can create it today and finance this contribution” by the deadline in October, says Bronnenkant. Since pension contributions are tax deductible, this can help lower your tax liability.

Tax rebate

In certain cases, the IRS may waive fines. For example, if taxpayers were affected by a natural disaster. Smith also notes the program “Reducing fines for the first time”, which helps people reduce fines if they first violated the deadlines.

Smith adds: “If you were a good boy or girl, you can be canceled.”

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