3 things to know before filing a tax extension | News
By Chris Smith
With this year’s tax deadline rapidly approaching, you may find that filing an extension is a good option for you. But before you plan to do that, here are three things you’ll want to keep in mind.
Taxes are due April 15. The extension only gives you additional time to file your return; it is not an extension of time to pay the tax that may be due. The assessed tax, even if you have not yet determined how much it is, is due by the April 15 deadline.
Calculations are important. If you are thinking about filing an extension, you’ll need to calculate an estimate of your tax liability. If you anticipate that you will owe taxes, be sure to make a payment when you request an extension to minimize any late-payment penalties and interest.
IRA contributions don’t get extensions. If you plan to make contributions to your Traditional or Roth IRA for 2014, the deadline to make them is April 15, with no extensions permitted. If you are self-employed, you may qualify to participate in a SEP IRA. The deadline to make contributions to a SEP IRA may be extended to the extended due date of your tax return, which is typically Oct. 15. If you don’t have the cash to make a SEP IRA contribution right now, file an extension, pay your estimated tax liability by April 15, and make your SEP contributions later in the year when you have the cash to reduce your tax and save for retirement.
Making informed decisions about your taxes can have a significant impact on your overall financial health. Whether you do your taxes on your own or you consult with a tax professional, understanding both the requirements and your options can help you develop a tax strategy that works for you.
Chris Smith, CPA, is the owner of CB Smith & Associates, P.C., based in Cumming.