It’s easy to file for a tax extension – but, as you’ll see, you should do everything in your power to file your taxes on time. Don’t file for an extension if you can help it. The penalties for late filing really get costly.
First, the easy part. Let’s discuss how it’s done.
The benevolent folks at the IRS provide Form 4868, which is the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. As long as you file this form by the regular tax deadline (which is normally April 15) you’re OK.
What do you get by filing Form 4868?.
By filing Form 4868 you’ll have until October 15 to file your tax return.
Note: Sometimes you have no choice but to file for an extension. If that’s the case, make sure you minimize the other costs associated with filing your tax return late.
What don’t you get by filing Form 4868?
A reprieve. You might get more time to file the return, but you won’t get more time to fork over the money you owe to Uncle Sam. So the extension is no help if you are looking for IRS tax debt relief. You must estimate the amount due and include it with your Form 4868. If you don’t come within 90% of the actual tax you end up owing, the IRS will slap you with a ½ of 1% per month penalty up to a maximum of 25%. That’s on top of the interest you’ll pay for any unpaid balance.
What if you don’t file for the extension and you don’t pay your tax by the normal filing deadline?
In this case, you’ll pay a late penalty fee of 5% of the amount you owe PER MONTH, also up to a maximum of 25%. It also might lead to a wage garnishment.
What if you complete your return but don’t have the money to pay the tax due?
Don’t file for an extension. Pay as much as you can (even if you have to start borrowing money to do so) and contact the IRS or have your tax preparer do so. If you have an IRS tax liability, you can find several ways to work it out with them, but ignoring the issue isn’t one of them.
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How do you file for the extension request?
These days most people are e-filing their tax returns. If that describes you, you can e-file your extension request. Simply contact the vendor of the software you use and they’ll walk you through it. You can also go to IRS.gov and download the forms if you like, or call your public servants at the IRS at 800-829-1040.
Now, why am I so adamant about not requesting an extension? Well, once in a while you’ll have to request an extension due to circumstances beyond your control. Maybe your CPA got ill. Or perhaps you haven’t received all your 1099s or other important forms. But in most cases, with all due respect, people who need to file for an extension do so because they haven’t got their act together. If this describes you, you know who I’m talking about. Here’s a hint – if this never happens to you, I’m not talking about you. But if this happens almost every year, you owe it to yourself to take a hard look at the way you handle your cash and/or financial documents.
If you use a tax preparer, she should send you a tax planner every year. If you’re like most people, you complete the form after much procrastination and then get rid of it. My suggestion is for you to contact your CPA and ask her to send you two planners. Keep one as a guide. It will tell you all the items you need to keep track of. It lists the required documents right there on the planner.
By tracking your expenses and being on top of your financial documents, you’ll never have to worry about filing for a tax extension. That will be great because when you put your taxes off, it really gives you nothing. You might get a little more time, but if you’re like most people I know, it’s just six more months of worrying about filing your tax return.
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