Tax experts, like many other experts, sometimes forget how much they know that other people don’t know. We may use vocabulary our clients don’t understand or forget to tell them things that are obvious to us. So it’s very important to pass on critical facts to your clients about filing for an extension and other deadlines.
You can’t just NOT file
Some people, if they don’t have all their information together or if they don’t have enough money, think they can just file when they’re ready. They may know it’s not really a good idea, but they don’t realize how bad an idea it is!
The penalty for not filing a federal tax return on time is TEN TIMES greater than the penalty for not paying: 5% of their taxes vs. 0.5% per month! And after 60 days, fees can increase to 25% of the balance due. These are frightening numbers, which can often help your clients realize the critical importance of filing taxes or an extension on time. Even when filing an extension, they need to include an estimate and try to pay something on their taxes, in order to keep fees and interest on an unpaid balance low.
If your client does not owe taxes, there is no penalty for filing late, but it’s still best to submit federal tax returns as soon as possible.
Federal Tax Dates after Filing an Extension in 2022
Tax day (April 18 in 2022) is the deadline to file for a 6-month extension with the IRS. This gives your clients time to complete their documentation, but as mentioned, if they can pay an estimated tax bill, they should do so to avoid any interest or fees. After that, they will have to watch other critical dates.
There are many tax deadlines every month, and there are many technological ways to track this information, often built into your tax software or included in your calendar. Be sure to always communicate these important dates to your clients. Business clients, entrepreneurs, and contractors/freelancers will also need to keep track of quarterly reports and/or tips reports.
Taxpayers who have filed for an extension must file the completed 1040 Form and pay taxes by October 17, 2022. Those with an extension also have until October 17 to withdraw excess IRA contributions in 2021 to avoid a penalty, and the self-employed (who filed an extension) have until this date to contribute to a solo 401(k) plan or SEP plan for 2021.
Other important tax dates for the rest of the year:
- Tips Reported to Employer (Form 4070) for the previous month’s tips: May 10, June 10, July 11, August 10, September 12, October 11, November 10, December 12
- Estimated quarterly tax payments: 2nd Quarter, June 15; 3rd Quarter, September 15
- Contribution to employer-sponsored retirement plans for 2022: December 31
- Required minimum distribution (RMD) for individuals 73 or older by the end of this year: December 31
Keeping Clients Informed
The existence of many deadlines highlights the importance of providing your clients with regular methods of communication. A monthly or quarterly newsletter, either via email or standard mail, can remind them of these dates and help them provide you with necessary data on a timely basis so you can provide them with the very best tax services.