Taking care of taxes for the self-employed
Tips for first-time self-employed filers
There are just a few days left in the 2022
tax season, but millions of Americans still need to file their returns to the IRS.
If you are among those who have not yet filed your taxes – and are unable to complete them by the Monday deadline – don't fret: There's still time to file for an extension.
YOUR TAX REFUND COULD BE DELAYED THIS YEAR – HERE'S WHY
Individuals can request an extension online by filling out Form 4868 using the IRS’s "
Free File" tool. You need to submit the form by April 18 or print the form and mail it to the IRS address for your state, making sure it's postmarked by April 18.
Once you file the extension, you have until Oct. 17, 2022, to file your taxes.
However, there are pros and cons to requesting an extension.
IRS headquarters in Washington, D.C., Feb. 25, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)
It can give filers more time to thoroughly review a return and take advantage of all the tax benefits, like various deductions and credits available to help reduce liability. By pushing back the filing date, you can also avoid a failure-to-file penalty — an extra 5% per month on the unpaid amount, which can add up to 25% of the tax due.
If you file for an extension, you have until Oct. 17 before the penalty starts accruing.
Experts caution that filing for an extension does not mean you can delay paying the
government the taxes you owe.
"Extension to file is not an extension to pay," Eric Bronnenkant, head of tax at online financial adviser Betterment, told FOX Business. "A common misconception is that you get more time to pay, and that’s not true."
If you owe taxes to the federal government, payments are still due on April 18, which is the deadline this year. The IRS offers some
payment plans to individuals who are unable to pay the full amount of taxes they owe. The more you pay by April 18, the less interest and penalty charges you’ll owe later.
Those who request an extension will be required to estimate their tax liability. If you underpay, you'll be charged the penalty, and if you overpay, you won't get the extra money back until after you file. To calculate tax liability, or the amount owed to the government on 2020 income, individuals must fill out Form 4868. On Part II of the form, taxpayers will enter their expected tax liability, rounding up to the nearest dollar to determine which tax bracket they will likely fall under.
This April 13, 2014, file photo shows the IRS headquarters building in Washington. (AP Photo/J. David Ake, File / AP Newsroom)
If you file for an extension but still don't pay your taxes, the IRS could charge you a failure-to-pay penalty. It will typically charge you 0.5% of your unpaid taxes for each month you don't pay, up to 25%.
Of course, if you're expecting to receive a refund this year, and you ask for an extension, you won't get that money until you've filed your return. The sooner you file, the sooner you get your refund.
As of April 1, the IRS has processed more than 89 million returns and issued more than 63 million refunds worth a collective $204 billion. The average payment so far is about $3,352, much larger than last year's average of about $2,800, though that may change by the April 18 deadline.
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Filing your taxes electronically is the fastest way to get a refund, according to the
IRS, especially as the agency works its way through a backlog of paper returns that built up during its closure earlier this year in response to the pandemic.
The agency issues nine out of 10 refunds in less than 21 days. In the 2021 filing season, about 96% of taxpayers filed their returns online.
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