Tax extension ( filing with IRS for a 6 month extension on annual tax return )
Due to two injuries earlier this year and subsequent medical/living expenses for the two-three months afterwards that I was out of work, I now don't have the money to pay my taxes.
My mom was going to help me out, but she just lost her job. My fiance just moved out and saddled me with the whole of our rent and I haven't found a roommate yet, so I'm really honestly broke. And I'm working 5-6 days a week right now to dig myself out of the financial hole that I'm in.
Any thoughts on how to file for an extension on my income taxes? I don't think I can earn $7000 in two weeks.:-[
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
My advice: File the extension now. You get 6 months to complete your return. As soon as you have the money, file your return (within the 6 month period).
Result: You will not get a late filing penalty. You will be assessed interest and possibly penalties for not paying your taxes on a timely basis. But maybe not, it really depends on your entire tax situation. But if you need time, then you need time.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
Filing for an extension would be a mistake. As Melonie pointed out, it will increase your chance of being hit with a substantial penalty. I suggest you file your return on time, and consider filing a form 9465...
This allows you to pay off your tax bill in monthly installments over a period of up to 3 years.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
Quote:
Originally Posted by
Glider Ace
Filing for an extension would be a mistake. As Melonie pointed out, it will increase your chance of being hit with a substantial penalty. I suggest you file your return on time, and consider filing a form 9465...
http://www.irs.gov/pub/irs-pdf/f9465.pdf
This allows you to pay off your tax bill in monthly installments over a period of up to 3 years.
You can certainly file your return and request an installment plan. And if your return is completely done that's probably the best thing to do. But I disagree with the statement about filing an extension: "... it will increase your chance of being hit with a substantial penalty." That's just not true.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
Perhaps I should clarify. Yes, filing an extension, in and of itself, will not increase your chances of incurring a penalty. However, if you owe taxes, then you need to address this with the IRS, and you need to do it by the April 18th deadline. Form 9465 is one option. Form 1127 (Payment extension due to hardship) is another. If you need additional time to prepare your return, then you can file one of these forms along with the form 4868. But don’t make the mistake of thinking that filing for an extension will, by itself, in any way help in regards to your tax debt. That’s the point I was trying to make.
The IRS offers a number of options for people who have difficulty paying their tax bill. I suggest consulting a tax professional, or researching at to find the option that is best for you.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
^^^ I'll actually clarify a bit more. As a 'sole proprietor' business instead of an employee, independent contractor dancers are required to 'withhold' their own estimated tax payments. Instead of having an employer's payroll system to divert money out of employee paychecks and send it to the IRS on a weekly / bi-weekly / monthly basis as an estimated tax payment on behalf of every employee, the independent contractor dancer is required to divert money out of her business profits and send it to the IRS on a quarterly basis as an estimated tax payment on behalf of herself.
If an audit of any 'sole proprietor' business occurs, one of the first things that IRS auditors will look at is whether those quarterly estimated tax payments were actually made, and whether the amount of those estimated tax payments was 'close' to the actual amount of taxes due in each quarter based on probable quarterly earnings. If estimated tax payments were NOT made in each quarter, or if the amount of estimated tax payments were significantly lower than the actual amount of taxes due in each quarter based on probable quarterly earnings, the IRS can assess both interest charges and penalties.
Let me state a concrete example. Suppose dancer X worked throughout 2010 earning a gross amount of $1000 per week or $13,000 per quarter. Further suppose that she did not make ANY quarterly estimated tax payments in 2010 and is now doing her 2010 tax return. From an IRS viewpoint, the IRS was owed somewhere around $3000 in estimated tax payment on April 15th of 2010, owed another $2,500 in estimated tax payment in June, another $3,000 estimated tax payment in September, and yet another $3,500 in estimated tax payment in January of 2011. Since dancer X did not make any estimated tax payments, she is potentially subject to a 10% penalty on the $12,000 worth of estimated tax payments that she did not make = an extra $1,200on top of the $12,000 she owes for income tax on her 2010 income. Additionally, the IRS can also charge her a full year's interest on the $3,000 payment that she did not make last April, 9 months on the $2,500 payment that she did not make last June, 6 months interest on the $3,000 payment that she did not make in September, and 3 months interest on the $3,500 payment that she did not make in January of 2011.
The point here is that the IRS performs a few audits at random, but performs the vast majority of audits based on a high probability of recovering additional tax revenues. Adult businesses, and cash businesses are already tagged by the IRS as having relatively poor levels of tax compliance. As such, ANYTHING that attracts IRS attention to an exotic dancer's tax return ... such as filing for an extension or requesting time payments ... significantly increases the probability of an IRS audit.
Also, keep in mind that in addition to the total 2010 tax payment being due on April 15th, the estimated tax payment for earnings from January to April 2011 is also due on the same date !!! As such, an audit of dancer X could result in collection of the $12,000 in 2010 income tax due, plus the collection of $1,200 in IRS penalty plus additional IRS interest charges, plus the collection of another $3,000 in first quarter 2011 estimated tax payment. This is a fairly strong incentive for the IRS to dispatch an auditor ... because the likely amount of additional tax revenues the auditor could recover far exceeds the 'cost' to the IRS of performing the audit.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
I respectfully disagree with your estimated tax payment penalty calculation. As a sole proprietor you would file schedule C and your income and taxes would flow to page 2 of your 1040. You would file form 2210 to figure your underpayment of estimated taxes penalty and since you paid no taxes you would use the short method. Basically, the penalty is 2.383% if you pay by April 15th (not 10%).
The rest of the post is correct though, the IRS does target certain types of returns and businesses. Sole proprietors and I'd assume adult entertainers would be higher targets.
Re: Tax extension ( filing with IRS for a 6 month extension on annual tax return )
^^^ which is why I included 'potentially' !!!