What to Do After Filing an Income Tax Extension?

Reading Time: 5 minutes

Filing your tax returns can be a very overwhelming process. The situation can add to the complexity when you file an extension for your tax returns.

The extension is only allowed in certain scenarios like you missed the deadline because of any contingent liability.

If you’re missing a deadline then you may have to follow a very hectic documentation procedure to cover up for the missing deadline. Furthermore, extensions in some cases may also make you pay extra taxes if you do NOT understand the processes.

For assistance, it is extremely important to consult with a CPA who is experienced in such a field.

Understand the Difference Between Late Payment & Late Filing

There is a requirement to pay interest and penalties on the unpaid amount of tax. A 5% interest is charged on an annual basis on unpaid tax amounts which are followed by a compounding effect on a daily basis. The IRS has such rules set for people who have bad credit scores.

If such people do not pay their taxes on time, the IRS will file a substitute for them. Moreover, such people will lose the benefit of tax deductions and employee benefit schemes. 

There is an evident difference between paying late and late filing. It is also important to note that you may be subject to late filing or late payment penalties, and in some cases, you may be subject to both (late filing, late payment) penalties.

The main things to keep in mind when paying late or filing late are mentioned below:

Late Filing:

If you have failed to file your tax return on time and you haven’t even applied for the extension, you may be charged the percentage of the taxes you have not paid every month till the quarter of your total amount.

If the time period exceeds 60 days, you might have to pay double the amount for your taxes.

Late Payment:

If you miss the deadline, you will have to pay the penalty fee for late payment which is 0.5% of the unpaid tax amount every month to 25% of the unpaid tax amount.

These are the rules set by the IRS itself, so there is NO chance that you can escape from them. 

What to Do After Filing an Income Tax Extension?

After filing for an income tax extension, you may go through extra processes to file your taxes. These processes may include knowing all the extra late payment details and filing your taxes with accurate data.

Following are some steps to keep in mind after you file for a tax return:

steps to take after filing and income tax extension (state and federal)

Step 1: Check Your Extension Status with Federal Tax Department 

After filing for a tax extension, wait till you receive the confirmation receipt of the extension is accepted. You will get the confirmation receipt within 48 hours of filing the extension request.

  • If you applied for an extension through the mail, then you can track the status of your extension by contacting the IRS.
  • The IRS website will NOT be of any assistance to track extensions, you will have to call the customer service of the IRS (800-829-1040) to check in with the status of your request for extension and approval.

Step 2: Check Your Extension Status with State Department

As different states have different tax extension policies, make sure you comply with these rules as well.

If your state has a requirement of filing a separate federal tax extension with an extension application then you should check in with your state tax authorities.

However, for the confirmation of the papers of extension, you will still have to call the customer service of the IRS (800-829-1040).

Step 3: Consult a CPA if Extension Request Gets Rejected

Yes, extensions can easily get rejected even if you follow all the correct filing procedures.

The main reason for the tax extension being rejected is grammatical errors, wrong information, or misleading numbers.

You will be notified about the rejection through an email which is sent by the IRS.

Sometimes the IRS informs the individual to take prompt action to fix small errors in the extension form. It usually gives 5 days to make any amendments that are required by the IRS and file again.

However, getting rejection by the IRS depends upon your individual case as well. You should take a quick consultation with an experienced CPA to help you get the extension and fix the error.

Step 4: Calculate Your Due Tax

Once you have received the confirmation notice for your extension, the next step will be to calculate your taxes.

Step 1: Calculate your Late Payment Taxes

When you file for an extension, a 0.5% penalty is charged on the unpaid amount per month, and the maximum interest permissible is 25% of the unpaid amount.

To calculate the amount that is yet to be paid, follow the below-mentioned procedure:

 If your unpaid tax amount is $3000

  • Penalty per month = $3,000 x 0.5% = $15
  • Total possible late payment penalty = $3,000 x 25% = $750

Step 2: In Case You are Out-of-Country

There is a different tax rule for people who are out of the country. They are given the benefit of an extension of 2 months.

They are NOT charged with any penalty during this time period. However, compounding interest will be charged as per normal procedures. The interest rate charged in this case is:

  • A 0.81% plus 3%.
  • With each passing day, the interest rate will increase by 0.0104.

Step 3: Calculate Your Final Taxes With Penalties

To calculate the amount that is yet to be paid, follow the below-mentioned procedure:

For example, if you have to pay $3,000 in taxes and you miss the deadline then, you’ll pay:

  • 0.81% + 3% = 3.81% annual interest
  • 3.81% annual interest divided by 365 days = .01%
  • Penalty per day: $3,000 x 0.01% = $0.30

It is important to calculate your due amount prior to the payment so that you have an idea of what you’re getting into.

Step 5: Organize Your Necessary Documents 

You have to be meticulous while gathering all the necessary data and documents needed to file for a tax return. After filing for an extension, get all your papers in one place.

This will make it easy for you to track your tax returns at a later date. During the 6-month extension period, you must keep everything ready and organized.

The most prominent documents that you must gather are mentioned below:

  • Previous year’s tax return
  • Income statements
  • Payroll reports
  • 1099 income earnings
  • Receipts of business-related purchases
  • Brokerage statements
  • Virtual currency transactions

It is also important to note that you may need additional documents as well depending on your individual case.

Step 6: Consult with an Experienced CPA to Avoid Late Filing Penalty

In recent years, studies show that around 50% of the tax is being filed by private tax professionals now.

Filing your tax return is a hectic process. To be on the safe side you can always take help from an experienced CPA, they will help you get passed through the filing process in the right way. 

Experienced CPAs are extremely good at their jobs. They even give you the benefit of avoiding hefty tax penalties through their expertise in the field.

Facebook
Twitter
LinkedIn
Sign Up For Our Weekly Newsletter
*Email
AKIF CPA
5.0
Based on 107 reviews
powered by Google
Annie Phillips
Annie Phillips
12:35 10 Oct 21
Turn around time was amazing on the project I needed done. When you don’t understand all the different forms... communication is key and you will get that here. They are there to explain what and why you need it.read more
Meru Kapadia
Meru Kapadia
23:33 01 Oct 21
I usually don't write reviews much as everyone has different experiences, but definitely wanted to share the positive... experience I have had here and why I would recommend them to all my family, friends and co-workers.I got a referral for here from a friend, so thought of giving them a try over my old CPA firm. I have been going here for a couple years now and have to say they are top notch. They are always responsive and willing to work with me even when I am delayed. I generally like to ask a lot of questions and not once did I feel like they were annoyed by it and would very thoroughly and positively answer all my concerns with detail explanations. Even during the pandemic, they worked with me 100% virtual and it was seamless. Overall, I am very happy with this firm and will continue with them for the foreseeable future.read more
Kevan Shah
Kevan Shah
21:45 01 Oct 21
I’ve been going to them for 3 years now for multiple of my businesses. I changed to them after I had problems with my... previous CPA firm and I’m so glad I did! Best decision I ever made for my businesses. They have saved me thousands of dollars over the years as well as deal with my immensely complicated tax filling issues. No matter when I call, they always help answer all my questions (and trust me I have a lot) and put my mind at ease on all my concerns. I feel as if I am family the way they take care of me. The quality of their work has not changed; very consistent and professional. It is an understatement when I say I highly recommend them.read more
Maunil Shah
Maunil Shah
16:19 01 Oct 21
AKIF CPA is the best place for your tax needs! Saim has been easily available for my all my questions and concerns. ... Couldn’t ask for a better firm that provides excellent service and a familiarity with their clients. I always recommend family and friends to AKIF CPA!!read more
Shah Hussain
Shah Hussain
03:58 01 Oct 21
Hello AKIF CPA,I wanted to share my experience with you, your team and whomever may be reading this message. My most... humble thanks to you and your team for a being such great part of my success.You have done a fabulous job for us this year, and since you took over our books (during our most devastating times) you have literally taken weight off of our shoulders.Thanks for bringing everything up to date and also providing us with numbers or as you call it consultations, ahead of time so we could seal the holes.Great work!!!Shah H.read more
Sumit Dalwadi
Sumit Dalwadi
04:57 30 Sep 21
The professionals at Akif have been absolutely amazing! Quick to answer all the questions I had and always available... to offer their guidance.read more
Calvin R
Calvin R
20:21 29 Sep 21
I recommend these guys! I will be going back next year. They made everything simple and we understood what was... happening. There we issues with our taxes due to our previous accountant and these guys fixed everything. They answered our questions and service was always with a smile.read more
Ammoria Daniels
Ammoria Daniels
02:11 16 Sep 21
We contacted Akif with an urgent matter regarding corporate taxes. Akif immediately understood what was needed and... within days had everything ready to sign. The level of service we received was amazing and unmatched. Waqar expertise in trucking industry made our situation seamless. His communication was outstanding; I heard from him daily and could have been completed sooner if I was as fast as he was 😃 Highly recommended!read more
Joe Paneitz
Joe Paneitz
18:30 18 Aug 21
What an absolute pleasure to work with this CPA firm. My business is already seeing such a positive impact and growth.... I cannot believe I didn't connect with them sooner. This firm is helping in so many ways! 5 stars is an understatement! Thank you so much for your help AKIF CPAread more
Helptest ARCpoint Labs
Helptest ARCpoint Labs
15:02 18 Aug 21
The firm is quick, responsive, and has the latest technological software. Thus far, I have been with them for 3+ years... and will continue to work with them even after relocating. They make it easy even when I'm miles away. Would highly recommend them.read more
Luz Tipaz
Luz Tipaz
16:06 13 Jul 21
Saim and his team are the best CPAs in town. I have been their client for years. All started when I needed help with... company structure with multiple companies and then accounting and Taxes. I have been very happy ever since. Thank you AKIF CPA.read more
Maria perez
Maria perez
18:31 08 Jun 21
Me and my husband have been getting all of our personal Taxes, business Taxes, monthly bookkeeping, accounting and... payroll done with AKIF CPA. Recently, we had more stuff come up and had detailed analysis done on capital gains, single family rentals (SFR) and business disposition. You will only know how great this CPA company is until you have worked with them and given them a chance. Words can’t describe our experience. AKIF CPA gets the job done every time - very reliable, professional and affordable.read more
Afnaan Amin
Afnaan Amin
22:14 02 Jun 21
Very good experience, we had unique situation in regards to cross border income as Canadians currently residing in the... US. Income on both sides of the border through completely different channels. Everything was very easy and completed timely, I also had lots of random questions and Mohammad provided top notch service along the way and even after we finished our taxes!! Highly recommended.read more
Ryan Paton
Ryan Paton
10:56 08 May 21
I moved to the USA from Canada late 2018 as part of a promotion/relocation for work. For my 2019 returns, I used an... accounting firm recommended by the local Canadian social club in my city, which was a terrible experience. They were slow to respond to inquiries and would follow up in piecemeal requests which dragged out my return process over several months, often asking for information I had already provided.For the price I paid, I vowed to find better service. I found Mohammad online and decided to reach out. Mohammad was extremely responsive, took care of my US and Canadian returns as well as my wife's business returns in a timely manner. Overall, it was a very positive experience and I would recommend him to another in my situation.read more
Tuan Vo
Tuan Vo
01:59 20 Apr 21
I relocated to Texas from Alberta, Canada and needed a CPA to help me with my cross-border taxes as I was not happy... with the CPA that I used previously. During my interviewing process to find another CPA, I had good feedback from Mohammad as he was able to answer my questions regarding my unique tax situation with expertise, and importantly to me, in a timely manner. I decided to use his services for the current tax year and I have nothing but compliments for the work Mohammad provided. If you are in need of a professional cross-border CPA, I highly recommend reaching out to Mohammad Akif.read more
See All Reviews
js_loader
Archives

Crypto Tax & Accounting Newsletter Signup

*Email

Cross-Border Tax Newsletter Signup

*Email