I filed an extension on time and I am owed the first time home buyer credit from the fed but owe the state $1,400. Am I going to be penalized? What steps should I be doing now aside from finishing up my return?
You will pay interest to the state on the $1400 from 4/15/2010 to the time you pay the amount. For CA the interest is probably 4% a year (see
File your return. At this point, the interest is probably under $10 and not worth your time to calculate what it is. Don't worry; They'll send you a bill.
The state almost certainly provides an extension form or a voucher of some kind to cover the payment of the tax. The extension is an extension of time to file, not an extension of time to pay. You will pay interest on the late payment, plus (probably) a late pay penalty which may be up to 5% a month, usually with a cap of around 25%.
Get a voucher form and pay the tax as soon as possible. Interest and penalty run from the original due date of the return to the date the tax is paid.
Katie in San Diego
For federal you have to file form 4868 to avoid the 5% a month penalty. For CA, you get an automatic 6 month extension (and no need to file a form). Does the 5% a month penalty still apply?
Yes, of course. As I said, the extension is for filing, not payment. If the total tax shown on the return is not paid by the original due date, there is a penalty for late payment. The California penalty is
5% of the unpaid tax, plus 0.5% (1/2 of 1 percent) for each month or portion of a month that the tax remains unpaid, up to a maximum penalty of 25%. Cal. Rev. & Tax. Cd. §19132(a). California provides Form 3519 as a voucher to cover the payment of tax when the return is automatically extended.The federal penalty for late payment (IRC Sec. 6651(a)(2)) is 0.5% per month, up to a maximum of 25%. Many states follow the federal penalty rules. These penalties are subject to abatement for "reasonable cause." However, "I didn't know" is not reasonable cause for failure to pay.
Katie in San Diego
By the way, the 4868 does NOT relieve the taxpayer from the federal failure to PAY penalty. It only relieves you from the failure to FILE penalty.
Katie in San Diego
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