Most people don’t intend to fall behind on their taxes. It often happens when the tax deadline sneaks up on them, and far too soon, they find themselves scrambling to not only pay their tax debt, but the compounding fees and interest as well. This can cause the debt to balloon beyond what you’re able to handle, leaving you fighting against tax debts, in large part because you simply weren’t prepared for the deadline. Now, the deadline to file your 2022 tax return is only two weeks away. What can you do if you’re not prepared so that you can avoid this kind of situation? Keep reading to find out.
Sit Down with a Tax Advisor
Any time you have serious concerns about your taxes, it’s always a good idea to sit down with a tax advisor or CPA. Meeting with a professional can provide you with detailed information regarding your individual situation, rather than general guidance on best practices. Your tax advisor may be able to tell you right away whether or not you would qualify for an extension to pay, for example, or they can quickly help you submit a request for a filing extension, along with an estimate of what you owe. While we can certainly provide you with general advice in a blog like this one, often, the best choice is to meet with someone in person so that you can ensure the guidance you’re receiving is tailored to your needs.
Request a Filing Extension
One of the simplest and quickest things you can do to help yourself when you’re not prepared for the tax deadline is to submit a request for an extension to file. Generally, this is referred to simply as a “tax extension.” However, it’s important to note that this is only an extension on submitting your tax return, not an extension on paying what you owe. (We’ll discuss that more in a moment.) Receiving an extension to file is quick and easy. All you have to do is fill out and submit Form 4868. This can even be done electronically, which provides you with an automatic six-month extension on filing your return. While this can certainly allow many people to breathe a sigh of relief, it does still leave the question of what you have to pay, which leads us to the next thing you need to do.
Submit an Estimated Payment
Because a tax extension does not extend your payment deadline, you will still need to provide an estimated payment to the IRS by April 18th (since April 15th falls on a Saturday this year, and Monday is a holiday in Washington, DC, the tax deadline is pushed back to Tuesday). But how do you know what to pay if your tax return isn’t ready? You’ll have to come up with an estimated amount owed based on the information you already have, and provide that payment to the IRS when you file your request for an extension.
For many people, simply looking at the previous year’s return can give you a good idea of what you’re likely to owe. However, if your income or expenses have changed drastically, or if you’ve experienced a major lifestyle change in the last year, you will need to account for that when calculating your estimated tax payment. Once you’ve determined what you believe you will owe, you should submit this payment to the IRS. When you file your full return, you will either pay any additional amount you owe, or receive a refund for any overpayment made.
Request a Payment Extension
If the looming tax deadline is causing you stress, not because of the paperwork, but because of what you will owe on deadline day, there are still options available to you. While it’s not nearly as easy to get an extension on your payment as it is to get an extension to file, it’s far from impossible. Submitting Form 1127, along with financial statements and details pertaining to your income and expenses, will trigger a review of your financial circumstances. If the information you provided shows that paying your taxes would cause excessive financial hardship, you can have your payment deadline extended by six months.
Meet with One of Our CPAs Today
Many business owners often find themselves scrambling to get their paperwork in order and finances ready for the tax deadline. If you’re concerned about being able to file and pay on time, contact Peter Witts CPA today. One of our experienced tax professionals can help you with preparing your tax return, and guide you through requesting an extension to file or an extension to pay your taxes. Call now to schedule your consultation.