April 11, 2013

Tax Filing Reminders….

In Tax Planning

The filing due date for your individual income tax return is coming up and is due on April 15, 2013.  If you are not going to be able to file your return on time, you can request additional time by filing an extension by the April 15th due date.  The extension gives you an additional six months; until October 15th to file your return.   However, it’s important to note the extension does not give you any extra time to pay any taxes due.  If you do not pay the taxes that you owe by the April 15th due date, you will owe interest on the taxes due and you may owe penalties as well. 

Due to the enactment of the American Taxpayer Relief Act in January, some tax forms were not made available until February or March.  These delays may affect a taxpayer’s ability to calculate their estimate and pay their 2012 tax liability when requesting an extension to file.   Some of the delayed 2012 tax forms include Form 3800, General Business Credit, Form 4562, Depreciation and Amortization, and Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits).

As a result, the IRS has provided transitional relief from the late-payment penalty due to the delayed publication of some IRS forms listed in IRS Notice 2013-24.  If you file an extension, estimate your tax in good faith, and pay the tax due by the original due date, the IRS will provide relief from the late payment penalty if additional tax is owed and paid by the extended due date.  For example, when you do file your extended return and if additional tax is due, the IRS will waive the late-payment penalty (provided the additional tax is paid by the extended due date).  However, keep in mind, interest will still apply to any tax payment made after the original due date.  For further details, please see IRS Notice 2013-24.

Uncertainty remains around the estate and gift tax exemption amount last year resulting in some taxpayers making taxable gifts in 2012.  If you made gifts in 2012, you may need to file a Form 709 gift tax return by April 15, 2013.

If you file a Form 4868 to automatically extend your due date for filing your 2012 individual income tax return, a six-month extension of time to file the Form 709 is also granted.  If your individual tax return is already finished and you do not need to file an extension request for your income tax return, you can file a Form 8892 to automatically extend the due date for the gift tax return to October 15, 2013.  However, like the income tax extension, an extension of time to file a gift tax return does not extend the time to pay the gift tax.  You must estimate and pay the gift tax by the due date of April 15, 2013.  In 2012, the lifetime application exclusion amount was $5,120,000 per person.  So while a gift tax return may be required, any taxable gifts made below an individual’s remaining lifetime exclusion amount would be sheltered from gift tax.

Please contact your Coldstream Relationship Manager should you have any questions and we are happy to coordinate with your tax advisor.

By Vince Lee, CPA/PFS, CFP®

Partner & Director of Wealth Planning

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