Karla Dennis, CEO and founder of Karla Dennis & Associates Inc., joined Cheddar News to explain what's needed in order to file for a tax extension and avoid penalties.

Karla Dennis, CEO and founder of Karla Dennis &amp; Associates Inc., joined Cheddar News to explain what's needed in order to file for a tax extension&nbsp;and avoid penalties.

Closing Bell

What to Know About Tax Extensions

Tax season is upon us. And every Monday here on closing bell, we share tangible tax filing tips to make sure you get the biggest refund check possible. And we're getting closer to that April 18 tax deadline. If you haven't filed yet, there's always an option to request an extension, but there are some important things you need to keep in mind if you do decide to extend your filing deadline. I'm joined today by Carla Dennis. She's a tax expert and founder of accounting firm, Carla Dennis and Associates. So Carla first off, what does filing for an extension actually mean An extension of filing really means that it's an extension of time to file. If you file that extension timely by April 18, you will have until October 16 to actually file your return, but it's not an extension of time to pay payments are still due on April 18. So if you still have to pay what you owe by April 18, how can you calculate that amount or do you just estimate it and hope for the best? Yes. What you really want to do is come up with your tax liability as closely as you possibly can to what it is that you think your liability is going to be for 2022. And then you want to figure out have you paid in any tax, what your withholdings are on your w-2 or any other third party paperwork you may have or your estimates and then you want to pay the remainder by April 18 to avoid penalties. Now, can you walk us through the steps of how to file for a tax extension if you do want that October date? Yes. In order to file a tax extension, you really need to fill out form 48 68 you can do it one or two ways, you can do it the old fashioned way by get the form actually fill it out with your identifying information, name, social security number address, and your tax liability as well as how much tax you've already paid in. And then there's a balance due, write a check included in your envelope, Certified return receipt and mail it in. Or irs really is pushing for electronically filing your extensions online. So you can go to irs free file and you can actually make a payment towards your taxes for 2022 and indicate it is an extension. Now, some taxpayers have an automatic extension if they're affected by a disaster which many parts of the country this has happened to. So do you still have to request one if you are in one of those zones. Technically you don't have to. But as a tax professional, I recommend that you do just so you have your paper trail years from now and something comes up, you can always fall back on that. Um But technically it's not necessary now, extensions can get messy for late filer. So what are some tips? You have to avoid those penalties? Yes, to avoid the penalty. I really recommend that you pay as much as you possibly can by April 18 because there are two penalties that you have to deal with. There's the failure to file penalty and there's the failure to pay penalty and those penalties can really add up very quickly. If you find yourself where you just cannot pay, then I recommend you request a payment plan with IRS and you could do that online that will at least get you into compliance and prevent them from coming after you later on. Well, thanks to tax expert Carla Dennis. She's the founder of accounting firm, Carla Dennis and Associates.