(Art Credit: Kathryn Sheldon)
File an Extension for Freelance Taxes Now to Avoid Fines and Penalties
Missing documents? Mega-busy calendar? If you’re like many freelancers you have more than enough on your plate to keep you busy all day every day, without the added burden of tax preparation. However, the IRS doesn’t take kindly to missed tax filing deadlines, which is why you need to file your taxes by the April 18 deadline, or file an extension now to avoid paying fines and penalties later.
Here’s what to do if you can’t file your freelance return on time:
- Make sure you file Form 4868 by April 18, 2022 to get an extension of the filing deadline to October 15, 2022.
- Make a reasonable estimate of your tax liability for 2021 and pay any balance due with your extension request. If you don’t and you file and pay late, the IRS may assess a late-filing penalty of 4.5% per month of the tax owed and a late-payment penalty of 0.5% a month of the tax due. The maximum late filing penalty is 22.5% and the late-payment penalty maximum is 25%.
In addition, don’t forget to file any appropriate state and local extensions. For example, in New York City, you need to file a New York State extension and, if self-employed, in New York City you need to file an extension for the NYC Unincorporated Business Tax if you are subject to this filing.
Missing information or need corrected information, here’s what to do.
If you are missing information or need updated or corrected forms in order to file your taxes, these tips from the IRS can also help you take care of them so you can get your taxes filed on time (or with an extension if necessary):
- If you haven't received a W-2 or Form 1099, be sure to contact your employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.
- If you haven't already received the forms, you must still file your tax return on time or get an extension to file.
- If you do not receive the missing or corrected form in time to file your tax return, you can estimate the wages or payments made to you as well as any taxes withheld.
- If you receive the missing or corrected Form W-2 or Form 1099-R after filing your return and the information differs from your previous estimate, you must file Form 1040-X, Amended U.S. Individual Income Tax Return.
If you receive an incorrect Form 1099-G for unemployment benefits, you should contact the issuing state agency to request a revised Form 1099-G . If you cannot get it in time to file by April 18, you should still file an accurate tax return, reporting only the income you did receive.
Another potentially missing or incorrect piece of information may be related to advance child tax credit or economic impact payments. You must have the total amounts of advance child tax credit payments you received and the remainder of your child tax credit and the amount of your third Economic Impact Payment to claim a recovery rebate credit.
This information will be available in your online account or if you received these documents: Letter 6419, 2021 Total Advance Child Tax Credit Payments, and Letter 6475, (Delete: add in your) 2021 Economic Impact Payment. Add these for the total payment amounts. This will help you file an accurate return. If you have lost or misplaced these letters, you can check your online account.
Married spouses who received joint payments will need to log into their own online account or review their own letter for their portion of the total payment. If filing a 2021 return as married filing jointly, you should add the payments together to provide the total amount.
Don’t wait and pay fines and penalties! File an extension if you can’t finish your freelance taxes by April 18.
While there are many different reasons why you may not be able to file your freelance taxes on time, it is critical to file for an extension if you are not going to be able to make the April 18 deadline and make an estimated payment to offset your tax liabilities.
This is the first step in avoiding paying more tax and penalties in the long run. Then do your due diligence to obtain any missing tax documents so you can ensure that you meet the extension deadline well in advance.