Fountain Hills, Arizona (PRWEB) February 24, 2015
Many taxpayers get confused when the word ‘extension’ is mentioned. People may even think that the world is going to end if they file an extension. There are many misconceptions surrounding extensions that Fountain Hills accountant Dan Kuchan would like to clear up for taxpayers in 2015.
Rumor: Mailing in a blank extension form is all that is required.
Truthfully, mailing in a blank extension form may or may not work. If someone doesn’t owe any money when taxes are due on April 15, 2015, this action will extend the filing period until October 15, 2015. If money is owed and the form is mailed in like that, this will trigger a penalty for failing to pay and interest will begin to accrue. Generally this rate is one percent above the prime market rate. What taxpayers often forget is that the extension is an extension of time to file and not an extension to pay.
Rumor: It is too difficult to make a valid extension.
Getting a valid extension requires that the taxpayer and his or her tax professional make a determination as to the current tax liability. This process involves looking at the current year income and current expenses and determining the actual tax owed. This may be difficult because in many cases the taxpayer may be missing the tax document indicated the amount of income. If this is the case, an estimate can be used. In some cases the income from the previous year may be used if the amount is similar. Based on reasonable assumptions, the tax can be estimated and, if a liability exists, a payment of that amount should be remitted with the extension voucher.
Rumor: Taxpayers often seem to think that if they file an extension, it will increase their chances of getting audited.
This is completely false. Filing an extension will not increase a taxpayer’s chances of getting audited. Whether a person gets audited is based on their tax information and their statistical score, not if they file an extension. The IRS is mainly concerned with making sure the taxpayer has filed a fair and accurate tax return. If it takes a taxpayer a longer time period to gather their books and records, then they should use the extension time period to gather that information.
Dan Kuchan is a CPA living and working in the Valley and he can be reached at (480) 837-6083. For more information on tax assistance this season, or on how to handle tax challenges in 2015, visit http://dankuchan.com/ .