Don’t Be A Fool, Pay On Time!
Your I.O.U. Due In Two

Zen Mensch Accounting
Hey — I have until October 15, right? I just file that handy-dandy extension while I get my paperwork in order, build up my stash of cash and then file and pay in the fall. No worries, right?

Not exactly. If you are getting a refund, you can enjoy the procrastination and the government holding on to your money. But this is an extension to file, not extra time to pay. Wait long enough and the penalties could add up to 25% of your unpaid taxes — and then there is interest. Similar consequences will follow you at the state level.

At the very least, file extensions and do your best to pay estimates of what you expect to owe. (Failure to file a valid extension will also trigger penalties, should you end up owing.)

Are you self-employed? Then there is an even greater burden because you are expected to pay estimated taxes throughout the year.. So if Paula the Plumber scrambles to pay her $10,000 taxes all at once on April 15, it’s unlikely she will have $2,500 for the first quarterly instalment for next year’s taxes — also due, yes, April 15! It’s enough to drain her bank account (sorry!).

As an added incentive to get her act together, the IRS will also penalize Paula for not having made estimated tax payments. Sure, she filed on time but she did not pay into the system during the year like she is required to (and as employees do). For more about navigating estimated taxes, click here:

If you expect to owe, waiting six months to pay will only increase the pain. A fool and her money are soon parted. File an extension and pay as much as you can by April 15.

To access previous articles of the Mensch Newsletter, visit the (newly redesigned, you’ll love it!) ALSD website.

NOTE: Federal and state tax laws are subject to change. This article is presented exclusively for informational purposes and is not intended to substitute for obtaining tax or financial advice from a tax or other business professional.

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