It may be time to file income tax extension

The traditional April 15 IRS tax filing deadline was again extended this year as a result of the coronavirus pandemic.

This year the traditional deadline was pushed out to May 17, 2021. So, if you have not received all of your documents, or have not gotten around to filing your taxes, it is time to focus on filing an extension.

Similar to other years, this individual tax filing extension will take the extended filing deadline out to Oct. 15.

The first step is to prepare IRS Form 4868 Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This form can be mailed in or electronically filed. This needs to be postmarked or transmitted by May 17 to prevent you from being charged a late filing penalty.

However, filing an extension is simply an extension to file the return, but does not act as an extension to pay any balance due.

To avoid any additional late payment penalties, 100% of the 2020 tax balance must be paid in by May 17. This can be a bit challenging when the tax return is not completed.

It is advisable that you make a payment with the form 4868 that is more than sufficient to cover any anticipated taxes that have not already been withheld or paid through estimates. In the event that you overpay the taxes, the overpayment can be refunded or credited to the following tax year.

I often run across a misperception in the general public that if they are unable to pay their tax balance, all that needs to be done to delay this is to file an extension. This is not correct. You should use all means available to you to pay your tax balance in full by May 17 to avoid those penalty and interest charges, which can be quite expensive.

This rule that the extension to file is not an extension to pay may present challenges.

When a taxpayer is still awaiting documentation to complete their taxes, such as a K-1 form from an investment, then they need to have a solid estimate of the income reported from that investment to have a good handle on the resulting tax consequences. As a result, it is important that you make a solid estimate that would be on the high side for the anticipated tax balance. In the event that you over pay the taxes the overpayment can be refunded or credited to the following tax year.

There is no separate extension form for Ohio. A copy of the IRS form 4868 acts as any type of extension verification for Ohio.

However, just like the IRS, the state requires all taxes to be paid in full by May 17 to avoid any additional late payment penalties.

So, it is advisable that you make an estimated payment using the Ohio IT 40P Income Tax Payment Voucher by May 17 so that your tax liability is fully covered. Similar to the IRS, any overpayment at the eventual time of filing can be refunded or credited to the following tax year.

The extension requirements for local income taxes vary by taxing authority.

RITA and CCA are the largest local tax collecting authorities in the area. Both of those organizations honor the federal extension but require a copy of the federal extension be attached to the local return when ultimately filing.

You would be well served by checking with your local taxing authority to ensure proper extensions are filed to avoid any penalty and interest charges.

So, whether you are able to get your returns completed and filed by May 17, or you ultimately end up needing to file an extension, make sure that you get something filed.

Don’t forget that with all taxing authorities an extension to file is not an extension to pay. One way or the other, get payments in by May 17.

Paul Pahoresky