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Federal Employees News Digest : April 15, 2013
April 15, 2013 Vol. 62, No. 37 7 Visit us on the internet at www.FederalDaily.com The IRS allows for a six-month extension to file individual taxes. This extension is made by filing Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return). The IRS will grant the six-month extension provided that Form 4868 is mailed or electronically filed on or before April 15, 2013. Form 4868 can be downloaded from www.irs.gov. Any individual who files Form 4868 must enter on the form a reasonable estimate of their 2012 tax liability. The IRS can invalidate an extension if the estimate is understated. The extension request will be valid even if the estimated balance due is not paid with Form 4868. Employees can also receive a filing extension by paying part or all of their estimated tax liability with a credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS) at www.eftps.gov. An extension of time to file eliminates the late filing penalty provided the tax return is filed by the extended due date of Oct. 15, 2013. If an individual paid at least 90 percent of their 2012 tax liability through payroll withholding and estimated tax pay- ments during 2012 or through filing Form 4868, the late pay- ment penalty does not apply during the automatic six-month extension period. But the IRS charges interest on any unpaid balance starting from the original due date of April 15. The IRS may extend the filing deadlines for filing and paying the tax due for up to one year in an area affected by a feder- ally declared disaster. Interest is automatically abated if the IRS extends the due date for filing or paying the tax due. Military personnel on duty outside the United States and Puerto Rico (including members of all uniformed services under the jurisdiction of the secretary of Defense - Army, Marines, Navy, and Air Force), as well as members of the Coast Guard, National Geodetic Survey and National Oceanic and Atmospheric Administration Commissioned Corps on duty outside the United States and Puerto Rico, are allowed an auto- matic two-month extension (to June 15, 2013) to file their 2012 federal income tax returns. Form 4868 is not required. But inter- est on any balance due accrues from the regular due date of the return, April 15. Individuals who use this automatic extension must attach a statement to their return showing that they met the requirements to file after April 15. The deadline for filing and paying the tax due is automati- cally extended an additional 180 days for military personnel on duty in a combat zone, qualified hazardous duty area or contingency operation. The deadline extension also applies to Red Cross personnel, accredited cor- respondents and federal employees and contractors acting under the directions of the armed forces in a combat zone---for example, Afghanistan---or in contingency operations. Any individual who is unable to pay the bal- ance due with an extension request can request a six-month extension to pay by filing Form 1127 (Application of Extension of Time for Payment of Tax Due to Undue Hardship). When filing this form, the individual must show that they cannot sell assets or borrow to pay the tax due except under terms that would cause severe loss of assets and added liabili- ties. Form 1127 must be filed by April 15, 2013. An approved extension eliminates the IRS late payment penalty but interest charges will apply. The table below summarizes IRS penalties with respect to the late filing penalty and late payment. Violation Code Section penalty Failure to file return (late filing penalty) 6651(a)(1) 5% of unpaid balance for each month or part of a month the return is late. Maximum 25%. If the return is more than 60 days late, the minimum penalty is the lesser of $135 or tax due. There is no penalty if the return shows a refund. If the taxpayer is subject to failure to file and failure to pay penalties for the same month, the failure to file penalty is reduced by the failure to pay penalty. Failure to pay tax (late payment penalty) 6651(a)(2) 0.5% of unpaid balance for each month or part of a month there is an unpaid balance. Maximum 25%. The penalty is half the usual rate for any months an install- ment agreement is in effect. Employees who live in states with income taxes will need to find out how to request state income tax filing extensions. Some states allow for an automatic extension for state income tax returns if a federal tax extension has been authorized. But an employee who owes any state income tax with their extension will have to make arrangements with their state revenue depart- ments to pay any balance due with their extension requests. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. informed investor If necessary, employees should request a filing extension
April 8, 2013
April 22, 2013