As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accountant”. Send in your tax questions each week to firstname.lastname@example.org and I will post the question and give an answer from an experienced accountant.
I am way behind and know I will not have my stuff ready in time to file by the 15th. What should I do?
You will need to file an extension with the IRS. This is an automatic 6 month extension that is valid until October 15th. Keep in mind this will only be an extension for time to file, not time to pay. What you will need to do to avoid underpayment penalty (under paying your taxes) is pay 90% of your previous year tax liability (in this case 2009). For example if your total tax liability for 2009 was $10,000-90% of that would be $9,000. That’s what you would have to pay in. However your withholding is included in that. So if you had $8,000 withheld that same year, you would need to pay in $1,000 to make it to the $9,000 of your liability.
*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.