The Common Law: Tax Procrastinators Unite
Tax Procrastinators Unite
Procrastinating on your taxes? Avoiding the untouched stack of tax documents on your counter for the past two months? You aren't alone – lots of people find the annual April tax ritual daunting (or at least boring enough to avoid like the plague). Here are a few answers to common tax season questions.
How long should I hold onto the documents that support my tax return?
The IRS generally recommends that documents that support an item of income or deductions on a tax return be kept until the period of limitations for that return runs out. An individual tax return (and supporting documents) should be kept for at least three years. A more cautious approach is to keep the documents for six years, which is the limit the IRS can audit someone that it suspects has underreported income by 25% or more. The IRS suggests other hold periods for specific situations. Check out the IRS website to learn more (www.irs.gov – "How long should I keep records?").
I traveled abroad for half of 2013. My tax paperwork is a mess. There's no way I'll get everything organized and submitted by mid-April. I've heard about tax extensions - how do they work?
The IRS allows individuals to seek an extension by submitting Form 4868 (called the Application for Automatic Extension of Time to File U.S. Individual Tax Return). By submitting Form 4868, the person may be able to obtain an automatic six-month extension. The extension is generally four months for someone considered to be "out of the country."
It is important to know that obtaining an extension of time to file a tax return does not extend your time to pay taxes. Someone who requests the extension must still make an accurate estimate of their tax for 2013 and send any necessary payment with Form 4868 by April 15th. Someone who cannot pay the full amount due with Form 4868 may still get the extension, although they will owe interest on the amount of unpaid taxes, and may have to pay penalties. Once Form 4868 is filed, the completed tax return can be filed any time during the extension period.
Keep in mind that whether an extension is advisable is an individual decision that is unique to each person. You should talk with an attorney, accountant, or otherwise do more research to determine how the extension may affect your situation. Go to www.irs.gov/taxtopics/tc304.html to learn more about obtaining an extension.
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Marrs, Ellis & Hodge LLP, www.jmehlaw.com.
The material in this column is for informational purposes only. It does not constitute, nor is it a substitute for, legal advice. For advice on your specific facts and circumstances, consult a licensed attorney. You may wish to contact the Lawyer Referral Service of Central Texas, a non-profit public service of the Austin Bar Association, at 512-472-8303 or www.austinlrs.com.