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USA Today
18-03-2025
- Business
- USA Today
Need a tax extension? What to know about filing one.
Need a tax extension? What to know about filing one. Show Caption Hide Caption FEMA extends deadline to apply for wildfire relief FEMA has extended the deadline for L.A. wildfire victims to apply for federal aid to March 31. It was set to expire on March 10. Fox - LA For Americans accustomed to doing things on time, filing for a tax extension may seem like an unusual step. But there are lots of valid reasons you may want to get an extension, experts say – as long as you keep a few key things in mind. Here's what you need to know. Why would you need a tax extension? Some of the most common reasons increasingly have to do with investing in partnerships, said Larry Hoicowitz, owner of Larry Hoicowitz CPA, a Cleveland-based financial planning practice. That pertains to corporate entities like law firms, but also LLC's, some trusts, and S-Corporations. You may have some partnerships among some of the financial products you own without realizing it. Partnerships have more time to complete their accounting for the year just ended, Hoicowitz noted, and can also file for extensions of their own. If you're invested in one or more through your brokerage, it may take that company a while to get you your statements, and you may also receive statements marked as "preliminary" while you're waiting. Beyond those types of investments, you may simply have complications that make it hard to get all your paperwork together in time. Finally, it's also important to keep in mind that there are far fewer accountants out there than there used to be. If you work with one for tax prep, that professional may be more overwhelmed than you realize, and may need to file an extension for you even if you think you've gotten your paperwork in with plenty of time to spare. More: IRS cuts may mean refund delays and long waits. File early before potential cuts, CPAs say What do you need to know about extensions? While filing for an extension itself isn't a big deal, there is an important caveat, said David Alvarez, a San Antonio-based financial adviser with PAX Financial Group. 'The key thing that you have to remember is that it's an extension on filing your taxes,' Alvarez said. 'It's not an extension on paying your taxes.' That's why it's always a good idea to have a general sense of how much you're going to owe in taxes to the IRS and your state and local taxing entities, and to be reasonably current with those payments. Whether you decide to file for an extension on your own – that's IRS form 4868 for federal taxes – or with the help of a professional tax preparer, make sure you also make a payment if you're at all concerned that you may have underpaid. You can be penalized for underpayments. Also important to keep in mind: always file your extension electronically. The IRS has long been notorious for not keeping on top of the mail it receives, Hoicowitz said. Add to that layoffs that have cut staff, and a chaotic return-to-office transition, and you're far better off submitting anything important to the agency by electronic means. It's likely a good idea for state extensions, as well, he added.
USA Today
13-03-2025
- Business
- USA Today
Should you get a tax refund? Here's what to know about withholdings, estimated payments
Should you get a tax refund? Here's what to know about withholdings, estimated payments Show Caption Hide Caption 'Makes me cry': Teachers, students react to Education Dept. cuts Former students and teachers are reacting to the Trump administration's funding cuts and layoffs at the Department of Education. Receiving a big refund at tax time may feel like getting a windfall, but you probably know the old advice that you shouldn't give an interest-free loan to the government. Yet tax and finance professionals say it's a bit more nuanced than those two options. With some caveats, they say, most people should withhold or make estimated payments throughout the year that get them as close to what they will eventually owe as possible. 'I typically don't want our clients to be getting a huge refund,' said David Alvarez, a financial advisor with PAX Financial Group, in San Antonio, TEXAS. 'If you're overpaying, it's not like the government pays it back with interest. You obviously don't want to be surprised with a huge tax bill, and there could be penalties for underpayment. So as close as you can get to net zero is ideal.' "As close as you can get" may sound simple, but it also means knowing what your tax bill will be. 'It's frustrating that it's not straightforward at this point,' Alvarez said. 'It really should be something that you know, that the government knows, everybody knows what you owe. It shouldn't be a mystery. Oh, my god, I owe $10,000. Oh, I'm getting a check back for $5,000.' If it is a mystery to you – say you've had some changes in your personal or work life – you might want to invest in some professional help in the future. Having a good sense of your tax liability throughout the year is also important if you ever need to file for an extension, said Dan Hoicowitz, a CPA with Cleveland-based Larry Hoicowitz CPA. More: Can you still get reimbursed for 2024 benefits plans? Here's what to know On the other hand, if you know you're bad at saving, siphoning off a little more than necessary with every paycheck can be a helpful hack, said Rachel Elson, a San Francisco based wealth adviser at Perigon Wealth Management. 'But if you're going to do that, then you have to commit to doing something productive with the refund money,' Elson told USA TODAY. What does 'productive' mean? Use that money to get your financial house in order, whatever that means for your unique situation. If you have debt, pay that down first, since the interest you're paying to a lender is undoubtedly higher than anything you'd receive from a savings account or other investments, Elson said. If not, start or make more payments to an emergency fund. You could also fund an individual retirement account, including for the year just ended if you're doing it before the April 15 deadline. If you're going to use the money for savings, make sure it's a high yield savings account, Elson added.
