Taxpayers who needed more time to file their 2018 federal tax returns may have received an automatic six-month extension from the IRS. That extended deadline of October 15 will soon be here.
Keep in mind that the extended deadline gives you extra time to file your return—but not extra time to pay any tax owed. Tax payments are generally due by April 15. People who pay late are typically hit with a late-payment penalty of 0.5% per month plus interest. If you didn’t already pay the tax you expect to owe, paying it now will limit the penalty damage. Extension filers who miss the October 15 deadline will also incur a late-filing penalty, which is typically 5% per month but can run as high as 25% of the amount due.
The extended filing deadline offers a chance to make a few smart moves. The self-employed can make 2018 contributions to a SEP IRA, for example, until October 15, according to Gil Charney, director of the Tax Institute at H&R Block.
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The mid October deadline also offers a mulligan to taxpayers who contributed too much to a traditional or Roth IRA for 2018. Taxpayers can withdraw excess 2018 IRA contributions (including earnings) by October 15 to avoid a 6% penalty. If you already filed a 2018 tax return, you may need to file an amended return.
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