If you work with a CPA or an accounting firm to get your taxes done, you might have received some nerve-wracking news recently: due to a combination of factors including our recent government shutdown and the new tax laws, a lot of tax preparers are behind schedule and not everybody’s taxes will be filed on time. To quote The New York Times:
This is the most complicated tax season ever,” said Ross A. Riskin, a certified public accountant and an assistant professor of taxation with the American College of Financial Services.
The I.R.S. is estimating that it will receive more than 14.6 million extension requests this year, or nearly one in 10 filers. That would be the largest number of requests ever received in a year, an I.R.S. spokesman, Eric Smith, said.
If your CPA or tax preparer has informed you that your taxes might be delayed, here’s what you need to know:
Requesting a tax extension isn’t that big of a deal
The first time I had to request a tax extension—because I was a new freelancer who tried to DIY my taxes and realized I was in over my head—I felt like a failure. How could I miss such an important deadline? Would the IRS be mad at me? Would I have to pay a bunch of penalties?
The answers to the last two questions, at least, are no and no. The IRS will not shame you for filing an extension (like, how would they even do that), and you don’t get charged a penalty for filing the extension request. All you have to do is file a simple form, pay any outstanding taxes you think you owe, and you’ll have an additional six months to complete your tax return.
You still need to pay taxes by April 15
When you file your extension form, you’ll need to provide an estimate of the amount of tax you believe you owe, along with the amount of taxes you’ve already paid for the year. If you believe you owe more tax than you’ve currently paid, you’ll want to make that payment when you file your extension form.
If you’re thinking “but the reason I’m filing an extension is because I don’t know how much tax I owe,” you can skip the payment—but you might owe interest and penalties later.
Here’s how the IRS explains it:
Although you aren’t required to make a payment of the tax you estimate as due, Form 4868 doesn’t extend the time to pay taxes. If you don’t pay the amount due by the regular due date, you’ll owe interest. You may also be charged penalties. For more details, see Interest and Late Payment Penalty on page 2. Any remittance you make with your application for extension will be treated as a payment of tax.
Your tax preparer should be able to provide you with a suggestion of how much you might need to pay to avoid penalties. Remember: if it turns out you’ve overpaid, you’ll get that money back after you file your taxes. It’ll be part of your tax refund.
You also need to make most IRA and HSA contributions by April 15
If you’re planning on making HSA or IRA contributions for the 2018 tax year, you’ll need to make them by April 15. Filing a tax extension request doesn’t give you additional time to contribute to these accounts.
There is an exception if you are a freelancer or small business owner making SEP IRA contributions. In that case, the extension applies to your SEP contributions as well, and you have extra time to add money to those accounts.
You’ll get your refund after you file your tax return
If you’re looking forward to your annual tax refund, I have good news and bad news. The bad news is that you won’t get your tax refund until after you file your taxes. The good news is that, once your taxes are filed, the IRS shouldn’t take any longer to process your refund than it usually does—even during this particularly complicated tax year.
As The New York Times reports:
The I.R.S. has said it expects refunds to be issued on schedule. Typically, that means nine of 10 refunds
are issued within 21 days
, if the return was filed electronically and the refund is sent using direct deposit.
You can always check the status of your refund with the IRS, if you want to know where it is in the process and whether you can expect to receive it soon.
Don’t forget about state taxes
Each state has its own requirements for filing tax extensions. If you’re working with a tax preparer to file state taxes and they anticipate they won’t be able to get your taxes completed by the deadline, they should provide you with information about the state tax extension process.
If you use a CPA or tax preparer to file your taxes, how has your 2018 tax process gone? Did you get everything filed on time, or do you suspect your return might be delayed? Accounting firms still have a little over a week to get everything done, so this may turn out to be a non-issue—but if you do end up taking a tax extension this year, try not to spend too much time worrying about it.