Tax Deadline Looms

Originally published in the Cedar Street Times

April 4, 2014

If you have been hibernating through the winter months, it is time to awaken from your slumber and complete your tax returns for 2013.  As a tax professional it is interesting to see how each tax season seems to take on a flavor of its own.  This year I found that many clients did not come in early, but delayed gathering their tax information, and came in much later.  Another professional in the area called me last week and said he was experiencing the same issue.  Compressing an already compressed time frame certainly makes for long hours, and will probably lead to more extensions as well.

Over the past few years, new rules have been phasing-in which force financial companies to report cost basis in the stock they sell on your behalf.  (Generally I like this new requirement as I have to repaint my ceiling much less frequently as clients are no longer staring at it so intently to come up with the basis in the stock they inherited  thirty years ago.)  I recall last year, we had many clients with revised 1099 financial packages being issued well into late March.  Although I did not see a lot of late issued/revised financial packages this year, I have a feeling that has something to do with why many people opted to bring in their information later.

Technically, you are supposed to file an amendment if additional information surfaces that was not reported on your original returns.   This can be cost prohibitive, however, especially if it consists of minor changes.  If these items are missed, sometimes the IRS will just send a proposed adjustment and basically rework the tax return for you and propose a balance to pay.  California’s Franchise Tax Board will typically follow-up as well once they get wind of the issue from the IRS..

If you cannot get your returns completed on time, then you may wish to file an extension.

If you are filing your own extension for your personal tax returns with the IRS use Form 4868.  Be sure to get some kind of proof of delivery and make a copy of the extension.  Even with delivery confirmation it is difficult to prove what you sent.  The best way is to e-file the extension through home-use tax software or by using a tax professional that e-files and obtains an electronic submission ID (the new modernized e-file system replaces the old declaration control number system with submission IDs).  What about California?  In the midst of a tiresome sea of nonconformity with the IRS, I continue to applaud California for this one act – you need not file a form to be granted an automatic extension! After you have filed your federal extension you have until October 15, 2014 (six months) to file your California personal return as well.

BEWARE!!  Just because you file an extension does not grant you additional time to pay!  The tax you calculate on the return you are going to prepare and file by October is still due by April 15.  So if you think you might not have enough tax withheld, you need to make some good estimates and send in some checks.  You may want to hire a tax professional to help with this calculation.  You can send the federal check with Form 4868.  For California, you can use FTB Form 3519 to send with your check.  There are also electronic options for paying both of these.

If you do not pay your tax or file your return on time, interest and penalties are calculated based on any amount of tax you come up short. Interest varies with market changes (currently three percent a year for the IRS and California).

If you file an extension, but do not pay in enough tax by April 15, you will pay late payment penalties and interest.  The IRS late payment penalties are a half-percent of the balance each month (up to 25 percent).  California will charge you five percent up front plus another half percent of the balance each month (up to 25 percent).

If you fail to file an extension or file after the extended due date, the IRS and California penalties are each five percent of the balance each month (up to 25 percent).  California has an additional trick.  If you extend your return and then file late, they go all the way back to the original due date to calculate penalties and interest owed as if you never had an extension.

You may also incur underpayment of estimated tax penalties depending on your circumstances.

One other nice thing to know: if you owe no tax, you will owe no penalties, even if you file late.

Prior articles are republished on my website at

IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.

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