April 15 is fast approaching. If it looks like you won't be able to
file your tax return by the deadline, it's time to start thinking about
filing an extension.
Be sure you understand what an extension really means. A valid
extension simply means that your tax return will not be subject to a
penalty for late filing. But even with an extension, you may be subject
to a penalty for late payment of tax, plus interest on any balance due.
To avoid a late-payment penalty, you generally must pay at least 90%
of your ultimate tax liability by the time you file your extension.
For example, say your tax bill will ultimately come to $10,000, and
you have already paid $8,500 via withholding or estimated payments. You
can avoid a late-payment penalty by paying at least $500 with your
extension. (That's the difference between $8,500 and $9,000, which will
bring you up to the 90% level.)
Note that you'll be charged interest on any balance due when you file
your return, whether or not you're also subject to a late-payment
penalty.
For more information or assistance, contact our office.
Return to 2005 Tax Tips
