Extensions & Amended Returns:
Fact & Fiction If you filed your tax return on time this year, congratulations! If you didn’t, or
if you worry each year about filing it on time, read on! Let’s look at three
commonly-asked questions from child care providers on extensions and amendments. A: An application to file for an extension of time to file your tax return is Form 4868. This form must be filed by April 15 and show total income, deductions and any tax liability. Form 4868 gives the taxpayer an automatic extension to review your paperwork for a four-month period. However, filing for an extension does not allow you to delay payment of your tax obligation! Even though payment of the estimated tax due is not required when you file Form 4868, a reasonable estimate of the balance due must be sent with the extension. If the tax payment you send in with the form is understated, the IRS can invalidate the extension, charge penalties and/or charge interest. So try to estimate accurately: too little, and you may pay penalties; too much and you will tie up your money between the time you file for your extension and the time a refund check arrives. Q: If I amend my prior year return for a legitimate reason, will the IRS audit me? A: Amended returns are file to change items of income, deductions, or credits that were reported in error or omitted from the original return. You can also amend your original return to change your filing status, except going from Married Filing Jointly to a Married Filing Separately category after the due date of the original return. Form 1040X is filed for the IRS and a separate form should be filed to amend a state return. Some taxpayers hesitate to amend a return for fear that the IRS will have more time to examine their return. The truth is, filing a non-fraudulent amended tax return doesn’t affect the statute of limitations—the period the IRS has to challenge a return. On the other hand, fraudulent returns have a much longer statute of limitations, and can be re-examined for longer periods. If in previous years you have neglected to take deductions you’re entitled to, you should seriously consider amending your returns. Q: How do estimated taxes work? A: Very simply, estimated taxes are used to pay your tax obligations on a quarterly basis to avoid large deficits, which could result in penalties, at tax time. Estimated taxes are not solely for the self-employed and retirees, even though they usually pay taxes this way: any taxpayer can make arrangements to do so, too. The IRS and state tax authorities use separate forms for filing estimated taxes: Form 1040ES is the federal form, filed quarterly. Ask for the forms at any IRS office, copy them at your local library or ask your tax professional for them. Duane Bennett, MBA, is a Certified Public Accountant based in Linthicum, MD, who has done extensive research on day care taxes. |