Have you got your taxes filed for 2021?
Statistically, if you’re American and you’re reading this, 9 out of 10 of you filed by the April deadline.
The IRS website table for tax year 2021 tells us that’s 133,624,100 tax returns, 99% of which were e-filed.
Go, America! Way to embrace the e-file system!
So, this is for the estimated 14,800,000 of you that filed an extension.
Your deadline is looming, and visible on the horizon.
You have 8 calendar days left, and if you’re not preparing your return by now, you’d better wake up and inhale the aroma of the morning caffeine, fast!
Because our friends (said semi-sarcastically) at the Fed also tell us that 20% of the taxable income lives in those 10% of the returns.
They acknowledge, and it makes sense, that people that file extensions generally have more complex income and expense issues.
Now, before we go much further, I have dubiously good news for our friends and hurricane sufferers in the south Atlantic region of the country.
You’ve been given a filing reprieve until February 15, 2023 in South Carolina, North Carolina, and Florida.
But! Since the IRS feels strongly that the tax was due last April, they’ve made it clear the payments themselves are not eligible, just the paperwork.
As a quick informational aside, employers also have until February to file Q4 Forms 941.
This may not be the best possible news for wage earners, but we’ll see as the story unfolds in the near future.
I took a look because we know people in Georgia. It looks like they missed the worst of what was predicted. the IRS isn’t doing anything special for them as of today’s writing.
Form 4868 Extension and Estimated Tax Payments
I wonder how many of you almost-15 million people remembered that they had to pay the tax in full with their extension?
The answer, without any doubt in my mind, is not enough.
As I was playing around in my little statistical sandbox this fine fall morning, I discovered something that made me damned sad.
In 2020 (the most recent year with a stat on this) America paid $2,100,000,000 in estimated tax penalties.
Two-point-one. Billion. Dollars.
This is avoidable, wasteful, and terribly depressing.
Let’s address the Form 4868 extension first, because it’s our topic for the day.
Whether you e-file this, or clip a voucher and postal mail it in, there are blanks for the amount of tax due, and the amount you are paying with the extension.
I am sorry to say this, with all the hard-won expertise in this field I have, but there is no loophole or other “hack” for getting out of this.
In the dry-as-dirt parlance of the IRS, you are filing an extension to file, not an extension to pay.
I rub my crystal ball and feel the question on the minds of thousands if not millions: “How am I supposed to make a payment if I haven’t completed my tax return yet, and don’t know the amount?”
Estimate it!
Okay, you want a little bit more there?
First, look at what happened for you (and your family) last year.
Then, look at all the income and expenses you know about for this year.
There are online calculators for this sort of thing, and I’ll tell you what: if you end up owing $10,000, and your estimate you come up with fall short, at least for the love of God you’ll have dramatically reduced the amount of outstanding tax remaining.
Also, you don’t find yourself having to cough up the whole thing two months before Christmas.
Am I making myself clear here?
Taxes are inevitable, but suffering because of them is optional.
That’s right.
A lot of the excess money you pay is avoidable, with a little responsible planning.
You already run a business, and take on the unsteady seas of commerce.
Why trim your sails in such a way that your entire ship of business capsizes over something that everybody knows about already?
Granted, the IRS isn’t super-forthcoming, because hey, $2.1 billion dollars.
Let’s not fool ourselves. The system is obfuscated on purpose, to make the procrastinators and unwary pay more than their fair share in the interest of truth, justice, and the American way.
And by the way, let’s not forget that a lot of that penalty statistic comes from simply not making quarterly estimated tax payments.
If you’ve been paying attention in class, you know what I affectionately nickname these?
The Entrepreneur’s Withholding.
Only four times a year, people. On the 15th of April, June, September, and January of the following year.
And, if it lands on a weekend, you actually get until the following Monday.
Tuesday for the January one. Because of the holiday celebrating the birth of civil rights legend Martin Luther King, Jr.
Conclusion
The deadline for Form 1040 filing with an extension is a week from tomorrow, Monday, October 17th.
If you haven’t started yet, wake up!
Get going, get help if you need it, get it done.
You will add to the 7-layer poop cake of penalties an additional failure-to-file penalty if you’re late, and you know what I always say, right?
I HATE to see the IRS get a single penny more than they’re legally entitled to.
Want help? Reach out to us, and let’s see if we’re a good fit for you.
But…
You’d better act fast, like RIGHT NOW!