July 19, 2010 - The last thing someone thinks about during the summer is filing tax returns. However, many individuals have filed extensions giving them until October 15 to file their returns for the 2009 tax year. This can be a good thing for the traveler for a number of reasons:
1) Allows time to collect your tax documents without rushing for a deadline.
2) Gives you time to think about what you are actually reporting on your return.
3) Ensures that you have received all reporting statements.
4) If you use a tax professional, allows you to hire a more focused advisor and the freedom to ask question knowing that he/she is not in a rush.
5) Gives some independent contractors until October 15 to decide how much to contribute to their retirement.
There is one drawback to an extension which can often occur when a traveler has multiple state filings. Extensions delay the filing deadline, NOT the payment deadline. If there is any tax due, interest and penalties can accrue on the delinquent amount and on a multistate tax return, there is usually one state that has an amount due.
The IRS and state tax offices often distinguish between “failure to file” and a “failure to pay.” Taxes are always required to be paid by the due date of the return even if a return is not ready to be filed. In order to avoid a “failure to pay” penalty and interest, any potential amount due should be accounted for. Better to pay in too much to ensure that the amount owed is covered rather than to fall short. You will always get a refund of the excess when you eventually file the return. Failure to pay or file once can leave a mark on your compliance for 3-6 years depending on the policy of the taxing jurisdiction. If you have a refund, you do not really need an extension, however, if there is a subsequent audit and your return is changed showing a balance due, then the “failure to pay” AND “failure to file” penalty will be applied.
Next year, if you find that you have not filed by April 1st, it is a wise decision to file an extension even if you intend to file on time. This way, any unexpected event or job offer will not affect your tax filing obligations and you will have a lot less stress to deal with. Just be sure to have enough paid in to the taxing jurisdiction to avoid any penalty and interest charges.
About the author:
Joseph Smith is an IRS Enrolled Agent and former travel respiratory therapist whose firm (TravelTax LLC) provides tax preparation and audit representation for the mobile professional. He is a regular contributor to HealthcareTraveler, Locum Life and a speaker at the annual Travel Medical Professionals Convention. For more travel nursing tax advice, visit TravelTax.com.
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