Filing an Income Tax Extension Due to COVID-19

Filing Income Tax Extension

Many people have valid reasons for failing to file their taxes by the deadline. Every year, you must file your taxes by Tax Day, which is April 15th (Tax Day is usually on April 15 but was set back in 2020 and 2021 due to COVID-19). Here is how to avoid penalties for failing to file your taxes by the due date.

What is a Tax Extension?

A tax extension is a period of time granted by the IRS to taxpayers who are unable to file their taxes by the deadline. The extension is valid for six months and is available to all taxpayers. Filing an extension allows taxpayers to postpone their tax filing, but it does not exempt them from paying any back taxes.

There is an exception for taxpayers who are unable to return to the country during tax season. This means that if a taxpayer’s primary work is outside of the United States or Puerto Rico, the IRS will grant them an extension. If a taxpayer is “out of the country,” the IRS will automatically grant them a two-month extension without the need to fill out any forms. For someone who is not in the nation when taxes are due, that period lasts until June. If the taxpayer then requests for the standard six-month extension, they will still have until October 15 to file their taxes.

To learn more about whether you are eligible for the two-month extension, contact SDG Accountants and we will provide you with all the information you want at reasonable rates.

When should you get an Extension?

Although you do not need a reason to request an extension from the IRS, it is nevertheless important that you only request one for logical reasons. Here are some of the most common reasons why taxpayers file an extension each year.

Some typical reasons for requesting extensions include being on vacation and not being able to pay or file your taxes until you return. You will also be unable to file your taxes if you do not have all the required tax forms and documents. Because all forms and documentation are required when submitting your taxes, you should request an extension if you are unable to collect them all on time. You are not in a good financial position to be concerned about taxes right now. If you do not file your taxes on time or pay any overdue taxes on time, you will be penalized by the IRS, which is why you should always file an extension if necessary.

How to File for a Tax Extension?

Tax Extension Form 4868

To request a tax extension, complete Form 4868 by the due date (Tax Day). The form can be completed online or mailed to the IRS. The IRS makes the form available online in PDF format, so anyone can download or print it. If you need to file an extension, schedule a consultation with one of our experienced tax consultants today at a very affordable rate.

Is a State Tax Extension Any Different from a Federal Tax Extension?

A federal tax extension is similar to a state tax extension. If you file for a federal extension, you will almost always be granted a state extension as well. Some states, however, have different rules and deadlines for their taxpayers. In Florida, for example, you must file a state form F-7004 before the due date to receive a 6-month extension. In other states, such as Virginia and Colorado, taxpayers automatically receive a 6-month extension if they do not apply for it. Every state has its own set of laws and deadlines, and all taxpayers should adhere to the deadlines in their current state.

To learn more about how to file for an extension, consult our Miami Tax Accountants today. We can give you the best advice on your tax issues and assist you in filing extensions at reasonable costs.

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Calculate Capital Gains Tax on Cryptocurrency

Capital Gains Tax

What is Cryptocurrency?

Cryptocurrency is a digital currency or payment system that may be used to buy and sell products and services on numerous online platforms. It enables everyone in the world to send and receive money from the comfort of their own home. Cryptocurrency exists entirely as a digital currency that can be used everywhere and eliminates the need to always carry real money. It can only be used once since it is protected by databases and cannot be reused. Every cryptocurrency transaction is recorded in a public ledger. It is similar to a digital wallet. What is the point of even leaving the house if everything is digital?

Is Cryptocurrency Secure?

Cryptocurrency is primarily built and secured using a technology known as the blockchain. A blockchain is a type of highly secure database for recording and storing transactions. To someone who is just getting started with bitcoin, it can seem incredibly confusing. However, if you understand its purpose and functionality, it will be as easy as pie. To really understand what blockchain is, it is necessary to first understand what a database is. A database is a platform that collects information and stores it in an electronic file cabinet. It is typically organized in the form of a table, allowing the user to quickly find and use the information without having to spend hours searching for it. A database is designed to hold massive amounts of data for huge corporations or even government agencies because all data can be simply categorized by numbers and accessed by many individuals. At the very least, you will not have to spend hours digging through a real cabinet for a misplaced file!

Now that we have covered databases, let’s look at how they differ from blockchains. The structure of the two differs significantly; a blockchain stores its data in blocks/chunks chained together, whereas a database stores all its data in tables. A blockchain collects information in groups/blocks, and each block has a defined storage capacity. When one block is full, it is chained onto the previously full block, forming a data chain known as a blockchain. You are probably wondering how all that info is protected from hackers. Let me explain whenever a blockchain of data is created, it is structured in such a way that it cannot be easily accessible. Blockchains rely on a network known as cryptography. If tons of blocks connected with an overabundance of data is not enough to frustrate a hacker, cryptography makes it even more difficult. It is safeguarded by private keys that network participants can only obtain; these keys serve as a digital signature for all transactions. Overall, if you are ever concerned about your digital money being stolen, return to this post and you will be pleased with how secure your information is.

How Do I Gain on Bitcoin?

Capital Gains Tax

We can never escape paying taxes, no matter where in the world we move to. When living in any country, it is both a necessity and a requirement. So, how can you pay taxes if you continually or regularly use digital money to gain capital? Well, let me explain.

The IRS has addressed all of the citizens’ questions about filing their taxes when most of their income comes from trading. The IRS defined bitcoin as an asset equivalent to property in Notice 2014-21, and it is taxed accordingly. The IRS has made it mandatory to report any bitcoin transaction, no matter how little the amount. The tax rate on capital gains currently ranges from 0% to 37%, depending on how the gain is calculated.

The IRS has addressed all of the citizens’ questions about filing their taxes when most of their income comes from trading. The IRS defined bitcoin as an asset equivalent to property in Notice 2014-21, and it is taxed accordingly. The IRS has made it mandatory to report any bitcoin transaction, no matter how little the amount. The tax rate on capital gains currently ranges from 0% to 37%, depending on how the gain is calculated.

  1. The accounting method you employ to calculate gains.
  2. How long the coins were kept before being sold.
  3. Your total income for the year, including non-crypto transactions, as well as your tax filing status.

Let’s start with the accounting method. The coin sold is significant for the accounting method. Profits = sales price – cost basis is the formula for calculating the capital gain on any cryptocurrency. The goal is to have a larger cost basis to pay less tax on capital gains. To precisely identify the coins sold, detailed records are required. If you sell the coins with the highest cost basis, also known as Highest-in-First-Out (HIFO), you will have to pay the least amount of capital gain taxes. However, if detailed records cannot be discovered, you will be forced to use the First-in-First-Out (FIFO) approach, in which you sell the earliest purchased coin regardless of price.

After calculating your gains using an accounting method, you will categorize them as short-term or long-term based on when you sold them. Short-term gains occur when a coin is sold after being held for less than a year, and they are included in your income and taxed as regular income. Long-term gains arise when a coin is held for more than 12 months before being sold. These gains are taxed at 0%, 15%, or 20% depending on the tax bracket.

How Can We Help?

All of this demands the services of a tax accountant who can provide you with the most accurate estimate and assist you in making the most profit. SDG Accountants is one of the best accounting firm in Miami. We offer a variety of tax services, including US expat tax and US corporate tax. We can assist you in filing your taxes and estimating your capital gain.

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Failing To File Taxes

File Taxes

The Internal Revenue Service (IRS) is quite strict when it comes to employers/businesses failing to pay or even file taxes. There is no financial scenario that exempts you from paying taxes, and this is regarded as a significant infringement. Here is what happens if you do not file/pay your taxes, what you can do to avoid penalties, and how we can help.

What Can Happen If You Do Not File Your Taxes?

Every American is required to file taxes each year before the due date, even if they have not earned an income. There could always be additional taxes that need to be paid or a refund they are entitled to for taxes paid during the year.

If an American fails to file their taxes on time for the fiscal year, they may face substantial consequences. Assume you are that American, and your tax filing deadline was April 15, 2021. If you did not file your taxes for whatever reason and it is already June, you will be charged a failure-to-file penalty. The failure-to-file penalty is 5% of the unpaid tax for each month or partial month the return is late, with a maximum penalty of 25%. Remember that if your tax return is more than 60 days late, you may be charged a minimum of $435. The minimum penalty is $435, or 100% of the tax due on the return, whichever is lesser.

What Can You Do?

Even if you are unable to pay, you should always submit your taxes to avoid penalties and interest. Filing your taxes will spare you some fines as well as the loss of a potential return. Penalties for failing to pay are lower than failing-to-file so you need to file your taxes. If you are unable to pay, you can request an extension, which provides you with an extra six months to save and file your taxes. However, the extension must be filed before the due date, or you may be charged with a failure-to-file penalty.

What If You Fail to Pay Your Taxes After Filing Them?

If you do not pay your taxes after filing them on time, the IRS might charge you a failure-to-pay penalty. For the failure-to-pay penalty, you are fined 0.5 percent of your unpaid taxes for each month you do not pay, up to a maximum of 25%. Unpaid taxes also accumulate interest at the federal short-term rate plus 3%. Interest begins to accrue the day after your taxes are due and continues to compound daily until the debt is paid in full. Keep in mind that if you are charged both failure-to-file and failure-to-pay penalties, your total monthly interest cannot exceed 5%.

What Should You Do?

Do not be worried if you have unpaid taxes and have been charged penalties! You still have time to fix this! The first thing you should aim to do is pay as much of your taxes as possible before interest begins to accrue.

If you don’t think you’ll be able to pay your taxes on time, contact the IRS. They will do everything they can to assist you. They can help you figure out the best approach to pay your taxes while meeting your obligations.

How Can We Help?

SDG Accountants is one of the best accounting firms in Miami; we have many consultants that can provide you with the best guidance and lead you through the best solution in dealing with the IRS. When dealing with tax issues, you will need the assistance of an expert. You need a consultant who can represent you to the IRS and potentially identify a simpler way for you to pay your taxes. Our Miami Tax Accountant can assist you in negotiating payment terms and lowering your taxes to an amount you can afford.

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