How much money should I send to the IRS with my Automatic Extension?
If we file an Automatic Extension for you, you'll avoid the hefty failure-to-file penalty! However, an Automatic Extension does not extend the time to pay any taxes you may owe for the 2016 tax year. This page will help you figure out if you might owe money, and if so, how to determine the amount to pay by April 18, 2017.
About the Tax Brackets Above:
The US has a progressive tax system, which means only the portion of your income within the range shown above is taxed at the corresponding rate. The tax brackets above show you the tax rate you will pay on each portion of your income. For example, if you are single, the lowest tax rate of 10% is applied to the first $8,700 of your income. The next chunk of your income is then taxed at 15%, and so on, up to the top of your taxable income.
If you request us to process an Automatic Extension that is filed by the tax deadline and you pay at least 100 percent of your actual tax liability by April 18, 2017, you will avoid both the failure-to-pay penalty and late-payment interest.
Safe Harbor #1 – If you didn’t owe last year, and you made roughly the same amount of money, and had the same withholdings or made the same tax payment(s), you probably don't owe any additional taxes.
Safe Harbor #2 – If you owed money with your 2015 tax return, and you made about the same amount of money, and had the same withholdings or made the same tax payment(s), consider sending in the same amount you paid LAST YEAR.
Safe Harbor #3 – If you earned more income in 2016 than you did in 2015, and/or your tax deductible expenses were LOWER, then you need to do a little math. First, review what tax bracket you were in last year (see box, left). Then multiply your tax bracket by your increase in income. Say you’re in the 25% bracket and you made $5,000 more in 2016 than you made in 2015, that would be $1,250 ($5,000 x 25%). Next, take this additional $1,250 and send it in with the tax you paid last year (see your 2015 return). Also, keep in mind any additional tax you may have already withheld or deposited in some other way during 2016.
Safe Harbor #4 - After calculating your estimate, and if you can afford it, add an additional cushion to cover any unforeseen tax implications. Once we prepare and file your tax return(s), you'll receive a refund for any amount overpaid!
What about your State? If you have a state income tax return, follow the same method above. Run the numbers and if using Safe Harbor #3 probably use an estimated percentage rate of 10% as a good round number for most states.
Can't Pay on Time? The failure-to-file penalty is 5.0%. This is 10 times more than the failure-to-pay penalty, which is 0.5%. per month So with the Automatic Extension, we'll assure you avoid the big penalty. If you can't make a full payment by April 18th, don't fret! Just pay as much as you can.
DISCLAIMER: When using any of the Safe Harbor’s above, please know that we are not guaranteeing you still may not owe taxes when you file your return, OR that you won’t have interest or penalties. These are simply estimating guidelines to help you get a jump on your 2016 tax year liability.