Tax extensions are designed for individuals and businesses to have more time to gather the proper documentation that is required to file a proper tax return. The common misunderstanding is that with a tax extension is that you are given an extension of time to pay any taxes that are due. It is question that we are asked on a regular basis when the final tax bill comes in and there is a failure to pay penalty added into the total taxes due. This matter can be taken care of with creating tax estimated payment vouchers and making the suggested payments when due.
So what happens when a tax payer fall behind not by months but years?
This can happen to individuals and businesses and does happen all the time.
There are many reasons for falling behind. The idea here is not focus on the why, but how do we work with the client to fix this. The first thing we do is file a transcript request to see what has been filed and what has not. Then we request any w-2’s and 1099’s that are associated with our client’s social security number or tax identification number. Once we have all necessary forms, we start to prepare the tax returns and then send them in. Once we have all returns processed by the proper government agencies, we then begin the next phase which is to enter into an installment agreement. The federal government allows you to pay back all taxes due plus interest and penalties over 6 years. Each state varies in how many years they allow for repayment so check with your tax preparer. The process of catching up in tax return preparation can take up to six months but can vary greatly based on how prepared that taxpayer is.
For more information, schedule a free 1 hour consultation.