Filing ext also delays payment, NOT?

[AZ-Tax]

Client picked up their 09 tax return last weekend and wanted to look it over before I efile. Client says today, since we owe money, why would we efile today and pay when we can efile on Oct 15, 2010 and pay then?

Unless I missed something, the IRS starts charging interest from 4/15/10 on the balance due correct?

[travis bickle]

ya gotta

Client picked up their 09 tax return last weekend and wanted to look it over before I efile. Client says today, since we owe money, why would we efile today and pay when we can efile on Oct 15, 2010 and pay then?

Unless I missed something, the IRS starts charging interest from 4/15/10 on the balance due correct?

love those clients

[Burke]

Unless I missed something, the IRS starts charging interest from 4/15/10 on the balance due correct?

You betcha!

[PIGLEE]

And could be underpayment penalty, and could be subject to late filing.

[S T]

Agree

Late file could be imposed, most definetly late payment will be imposed. T/P is already there on the late payment as it should have been sent with extension form. Clock starts on 4/15 of due date filing.

Underpay on form 2210 could and will most likely also be imposed.

Remind T/p an extension (form 4868) is for filing the tax return only, extension is NEVER, for paying the tax due later than 4/15

Sandy

[JohnH]

If the extension was valid, then Failure to File will never be an issue provided the return is filed by Oct 15, regardless of when payment is made. (payment could even be made after Oct 15 and there would still be no FTF penalty imposed).

Taxpayer will be charged interest at about 8% APR plus Failure to Pay penalty of about 1/2 of 1% per month. This means they are paying roughly 1-1/4% per month (about a 14% APR) on the unpaid balance until the tax is paid, whenever that might be.

If taxpayer owes Estimated Tax penalty, then it will continue to run until the tax is paid, although the bulk of the estimated tax penalty would have been due even if the return were filed on 4/15.

Bottom line is that the taxpayer SHOULD file & pay at the same time, but if he can't pay or if he thinks it's worth 14% APR to hold onto the money, he certainly has the option to do so.

I've always been fascinated by the clever way IRS handles this. Even though IRS does CLAIM that the extension is only an extension of time to file and not an extension of time to pay, in reality it is both. It's a totally free extension of time to file, and it's an extension of time to pay virtually as long as one wants, provided they're willing to pay 14% APR. But the wording on the extension form is vague enough to intimidate people into thinking the payment is somehow connected to the validity of the extension - in reality it isn't connected in any manner.