April, 2007

Can I get an Extension?


The thing I'm supposed to say is "an extension to file is NOT an extension to pay."

That means if you expect to owe tax for 2006, you should send a payment WITH the extension. There's some possibility that if you don't include payment, the government could invalidate your extension, which leads to a 'failure to file' penalty based on what you owe. It's not clear how they decide if you willfully didn't make a payment vs. you just didn't know what you owed and you guessed wrong. To be honest, I've never seen them void an extension. But it could happen.

If you don't pay what you owe, late payment penalty and interest will continue to accrue, even if you DID file an extension. Filing the extension only allows you to avoid the 'failure to file' penalty of 5% per month or part of month, up to 47.5% of the amount owed.

So, if you want me to file an extension, let me know, preferably BEFORE APRIL 13. I'll be much more polite up to April 13--after that, I start to get stressed out (yes Virginia, even I get stressed out at some point!).

Let me know if you intend to make a payment with your extension; I can put you on extension electronically. Since my software charges me per social security number I "activate," I'll be sending a small bill to people I put on extension, to cover my fee. That way we're 'clean' -- if you go to someone else to get your return done, I've covered my costs. If you subsequently have Tax Buddha prepare your return, we credit what you've paid against the future return cost.

You can also do your own extension, look for Form 4868 at www.irs.gov <http://www.irs.gov> If you successfully file a Federal Extension and DON'T OWE STATE tax, you don't need to do a state extension (at least in CA). The federal extension covers you. If you DO owe state tax, you'll need to look for Form 3519 at www.ftb.ca.gov. I'm told you can pay CA with a credit card (for a fee).

Traditional/Roth IRA Contributions Must be made by April 17th

If you want to contribute to a "traditional" or Roth IRA, you have to have the money in the bank by April 17th (think April 14th!).

If you don't get the money in until April 18th, you've just made a deposit for your 2007 return.

SEP-IRA's ARE DIFFERENT -- they are based on your Self-Employment earnings, and you have to figure out what those earnings are to determine the maximum amount you can contribute. If your return is on extension and you're a sole-proprietor or partner, you don't have to contribute to a SEP until the extension deadline, October 15th.

It's already too late to set up a 401(k) or SIMPLE for 2006--but you could start now on 2007....

Estimated Payments Too

The first Estimated Tax Payments for 2007 are due 4/16/07. If you have a corporation, or LLC in California, you’ll owe at least $800 on this date, unless 2007 is your first year as a corporation.

Individuals may or may not need to make estimated payments. We usually determine this based on the prior year’s tax due. Of course, the first estimated payment for ’07 is due April 16th ’07, so it is helpful to prepare your return on time for ’06.

The government has a “pay as you go” policy on tax payments. “Normal” people have their income tax withheld from each paycheck. Other people need to make quarterly payments, or risk a penalty for paying “late.” The penalty is approximately 5% of the underpayment up to the due date, then approximately 8% per year (computed by day) after that. Interest is in addition to the penalty.

Classes – "The 'S' Corporation," “Schedule C, ” and Basic Payroll

Andy will be doing a short presentation on "Why I Love the 'S' Corporation" in San Francisco the evening of April 24th. Here's a link to the event:

Andy will be doing a longer presentation on the same topic June 20th in Pleasanton.

If you missed Andy’s “Preparing your own Schedule C” class at the Small Business Administration in SF, we're working on scheduling it again for third quarter.

Also, in conjunction with the IRS and EDD, Andy's going to be doing some Basic Payroll seminars coming up in the near future!

Refund Status – where’s my refund?

Paper filed Federal returns take up to six weeks, electronically filed returns take up to three weeks. (Amended return refunds take 8-12 weeks).

To check the status of your refund, the IRS has an on-line service called “Where’s My Refund?” at https://sa2.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
or you can call 800 829-1954, but they want you to wait 4 weeks after you mail your return to call.

You’ll need your Social Security Number, filing status (MFJ, Single, etc) and the exact amount of the refund shown on your return. Of course, it will be down this week-end, but should work after that. They say you can “run a trace” if you don’t receive your refund within 28 days.

California also has an on-line version at http://www.ftb.ca.gov/online/refund/index.asp and you’ll need your SSN, Mailing address and the refund amount.