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Tax Bites: Babies and Taxes... They all come due!

Kathleen S. Vaccaro, EA

March 16, 2017

First of all, a reminder that our "cut off" deadline is next Friday, March 17. That means if you want your tax returns to be filed by the IRS filing deadline of April 18, we need to have your materials in hand no later than St. Patty's Day.kathleen-vaccaro

In recent years about 70% of our clients hit that mark. The rest go on extension. Read on for tips on how to avoid problems if you need to file an extension this year.

P.S. There is also some good news from the Goldbergs!

Regards,

Kathleen S. Vaccaro, EA
Goldberg & Vaccaro Tax Services LLC


What do babies and taxes have in common?

Due dates, of course! And speaking of due dates... Steve and Thelma Goldberg welcomed a new granddaughter, Sierra Larkin Naughton, who was born just before her due date last week. New parents Robin and Mike, along with baby Sierra, are happy and healthy (and most likely sleep-deprived). Like all of us going down that path for the first time, they are probably also finding that they have a lot of questions about new parenthood.

Just like new babies, tax filing deadlines and extensions also generate a lot of questions. Unfortunately, I can't be much help to Robin and Mike (unless they need an extension), but I can try to answer some of your questions about tax filing extensions.

I know I'm getting a refund. What do I do?

If you know for certain that you are getting a refund, then all we have to do is file some simple paperwork by the original tax filing deadline of April 18, and you will have until October 16, 2017 to file your personal tax return. There are no costs and no penalties for filing an extension if all of the tax has been paid by the original due date of the return.

I know I'm going to owe money. What do I do?

The first thing to know is that AN EXTENSION OF TIME TO FILE IS NOT AN EXTENSION OF TIME TO PAY YOUR TAXES. You should contact us to help figure out an approximate amount you will owe. That payment can be submitted (either electronically or by check) with your extension. If you have paid everything you owe by the original tax filing deadline of April 18, there is no cost and no penalty for filing an extension.

I have no idea at all where I stand. What do I do?

If at all possible, you should send us some preliminary figures which may include W2s or an estimate of your self-employment or rental income. We spend a lot of time in the first two weeks of April helping clients figure out rough numbers so we can advise whether or not to make an extension payment by April 18.

How do I make an extension payment?

We can schedule an extension payment to be automatically withdrawn from your bank account by the original due date of April 18. Or we can send you an extension payment voucher that you can mail with your paper check. Any extension checks need to be mailed by April 18. There are also online electronic payment options available through the IRS and MA DOR websites.

I only have some of the funds available. What's the best strategy?

If you can only make a partial payment with your extension, we usually advise paying your Massachusetts extension in full, then paying as much as you can to the IRS. Massachusetts disallows extensions if you haven't paid at least 80% of your total tax bill by April 18. The IRS, on the other hand, will honor an extension even with -0- paid up front.

I have a big tax bill, but no money. Help!

You STILL need to file an extension, especially if you owe money. You will most likely incur late payment interest and penalties if you haven't made all payments by the original due date of April 18. Think of it as carrying a credit card balance. There's a cost, but you will avoid the highest penalty of all, which is the dreaded LATE FILING penalty, by filing your tax return or an extension by April 18.

What many people don't know is that the LATE FILING penalty can quickly add up to 25% of your total balance due on a federal return. Let's say you will owe $10,000 and you have no money to pay in April. You file an extension and make the payment in October. You will end up paying penalties and interest of about $500, for a total of $10,500. However, if you DON'T file the extension, the same late payment in October will be $10,000 plus $500 plus $2,250 late filing penalty = $12,750. Ouch!

So the worst thing you can do when you have taxes due is to miss the filing deadline.

An extension filed with -0- payments will put you in a much better position than nothing filed at all.

But, of course, it's always best to pay the full amount due with any extension. As the saying goes: An extension of time to file is NOT an extension of time to pay.

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Team Spotlight: Susan Hotz

susan-hotzIf you call our office this month, you are likely to speak with Susan Hotz, a friendly ray of sunshine during our busiest months. Now in her fourth tax season with the company, Susan works closely with our office manager to deal with the never-ending flow of paper into and out of the office. This includes scanning paperless copies of all of your original tax documents, tracking new information that comes in, and juggling crazy phone days near the deadlines.

Susan was introduced to our office through a "quilting connection"... fellow quilter (and longtime Goldberg tax professional) Tsesan Shaw. Most recently, Susan made a T-shirt quilt with all of her son's picture memory T-shirts. Susan and her husband Bill live in Natick, enjoy Boston sport teams and travel often using their time share network. They have successfully launched their two children, Lindsy, a Physician Assistant, PA-C and Bill Jr, environmental engineer, MEng, like his dad.


About Us

Goldberg & Vaccaro Tax Services LLC specializes in tax preparation and accounting services for individuals and small business owners.

Please give us a call if we can help you:

PHONE: 978-663-4537
FAX: 617-488-2270
EMAIL: office@goldbergtax.com

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