Are you in the habit of being fashionably late? This is a fine approach when attending to most things and even dinner parties, BUT………. Filing your taxes late, however, is never a good idea.
1. Automatic Penalty Reduction
Filing an extension timely provides a penalty reduction automatically. The penalty for late filing is .5% per month up to a maximum of 25% of your tax due.
2. More Time To Review Income
Filing an extension allows you the time to carefully review all of your income, deductions and credits to make sure you are reporting every item correctly.
3. More Time To Collect Tax Documentation
Filing an extension allows you the time to receive any corrected tax documents, including brokerage and investment statements. Generally, corrected statements include tax advantaged information.
4. More Time To Contribute To A Self-Employed Pension Plan
Filing an extension, depending on your sources of income, may allow the opportunity to contribute to a self-employed pension plan, even if not set up by the end of the prior tax year. Allowed contributions can be made anytime up to the last day of extended filing –October 15, 2015, and are deductible on your 2014 return.
5. Reduce Final Taxes Due
Filing an extension can help pay an estimate of your tax for 2014. Any ultimate penalties are based on your final tax balance due (if any) when your filings are completed.
6. Keeps State Filings Timely
Filing an extension helps keep state filings timely. Resident and Non-resident state income tax filings have similar penalties and interest charges which mirror the Internal Revenue Service. Each state has its own unique laws, and generally all include penalties for non-filing, late-filing and tax underpayments.
Call on your GBH CPA’s Tax Team to help assist you with your tax compliance and planning needs! We are here to help you and your family have more time together to do the things you like to do. Leave the tax worries to us!