Episode Transcript
Glenn Harper: 00:00:29
Hello, everyone. Welcome to another edition of the Empowering Entrepreneurs Podcast. I’m Glenn Harper
Julie Smith: 00:00:34
Julie Smith.
Glenn Harper: 00:00:35
What are you doing?
Julie Smith: 00:00:36
Well, you know, I thought we’d have a wardrobe change for you, but I guess we.
Glenn Harper: 00:00:39
No, no.
Julie Smith: 00:00:40
Funds are tight around here because it’s tax season.
Glenn Harper: 00:00:42
My favorite uniform. Got to look the part.
Julie Smith: 00:00:44
Yeah. So I think the topic that we get asked a lot or have to deal with a lot is someone like me just wants to avoid filing my taxes.
So I just want an extension. Or maybe you aren’t getting a certain piece of a document in time because who knows what happens and you need an extension.
What does an extension actually mean?
Glenn Harper: 00:01:07
An extension basically just says that you have the ability to say your tax return is technically due on April 15 as an individual, but you can just extend automatically for six months. And that form just says, hey, we’re going to give you.
IRS is going to give you another six months to put your things together to ultimately fine it for file an accurate, correct tax return that you have all your information on and you can stand by what you file. However, it doesn’t mean that you have an extension to pay.
So the hard part is if you don’t have all your information and you haven’t put it together and you end up owing, you can still file an extension to file. But if you owed money and you didn’t pay it on April 15, you’re going to get a penalty from that day until the day you finally do pay your money.
So we try to encourage people that will do an extension to file. But. But you should pay what you think you’re going to owe.
Pay a little extra just in case something moves around a little bit so that you can avoid a penalty.
Julie Smith: 00:02:02
You mentioned a penalty. What about interest?
Glenn Harper: 00:02:04
Yeah, they charge penalty interest on the unpaid tax due from the date it was due, which is April 15th.
Julie Smith: 00:02:09
So you’re talking very federal. But as we know, we have 50 states. So what does that look like for extensions for states, for locals, for the boroughs, for the townships?
All those things.
Glenn Harper: 00:02:18
Same thing. Most of the time, the federal extension will cover the state and the city. Other cities and states, you have to do an extension just for them.
But it does. It’s the same concept. Extension to file but not an extension to pay.
And don’t forget, if you’re a quarterly tax paying type of individual, you not only have to file your extension to pay and pay your tax, you think you’re going to owe in April for last year and you have time to file your return, but you also got to start paying your quarterly estimates for the next year, they’re due on April 15th. So you got to not only pay your extension payment plus Q1, so it’s really hard to try to guess that number.
So it’s really important to work all year long the prior year till you kind of know what that number is going to be. And you might still be waiting on some rogue form, but we already know what the amount is.
So you can make those estimated payments and the extension payment and have confidence that it’s probably an accurate number, as close as can be expected. And then, whew, you can relax for the next six months till you get your forms in before you can file your return.
Julie Smith: 00:03:17
And my guess is if you’re working with someone proactively, you probably can just file the extension because you’ve already paid and done the planning up until then.
Glenn Harper: 00:03:26
Correct. And again, a lot of people do get surprises. And really, whoa, where’d that account come from? Whoa.
All these long term capital gain distributions, what that happened there?
And so it’s really important to get your information to your tax people as soon as you can so we can identify if there’s any surprises that you didn’t even know what was going to happen. Because if that document comes later and we didn’t know about it, you, you’re going to be mad at me.
And I’m like, well, I didn’t know you’re going to have that income because that wasn’t in the plan. We got a surprise.
So try to get everything you can to your preparer as soon as possible so we can at least get the extension, get you an accurate amount that you’re going to pay with your extension payment. And then we can relax and get you some coffee.
Julie Smith: 00:04:02
Right?
Glenn Harper: 00:04:03
Everybody wants some coffee.
Julie Smith: 00:04:04
And do those calculations, right?
Glenn Harper: 00:04:06
Run the 10 key. Getting a cramp on my arm every year for that.
Julie Smith: 00:04:09
Yeah.
Glenn Harper: 00:04:10
All right. Well, hopefully that was helpful for all of you. And another edition of the Empowering Entrepreneurs Podcast. I’m Glenn Harper.
Julie Smith: 00:04:15
Julie Smith.
