Yes, we’re aware, taxes take time. And sometimes, it just seems impossible to get around to filing your taxes by that darned April 15th deadline. However, you’re not the first person to find yourself in this predicament. Every year, about 7% of taxpayers – roughly 10 million – file for a six-month extension.
But if this is the first year you find yourself landing in this group, read on to see what you need to know about filing an extension.
First, an Extension Is Not an Extension to Pay
By filing for an extension it only means you get an extension to file the paperwork. However, you still need to pay what you estimate you owe. If you don’t pay on time, the IRS will charge you interest and maybe even penalties that could increase your total tax bill by around 25% or more. If you have time to file the paperwork, but you don’t have all the funds available to pay, then read further to see what options are available to you.
How to Get More Time
Asking for an extension from the IRS isn’t like asking for time off from work during the holidays where you have to make your case (read: beg) your boss and hope they’ll say yes. The IRS calls it an automatic extension for a reason: They will automatically grant it if you ask.
First, estimate your taxes. Fill out as much of your 1040 as you can (find out which 1040 to use). You’ll use the figure from there to fill out Form 4868. Then, choose from these three options to file the extension:
1. Electronically file Form 4868 with your tax preparer or your tax software program
2. Send in Form 4868 to the IRS by mail.
3. Pay your estimated taxes using a credit or debit card. You can do this online or by phone, and you must pay at least $1. Even if you are not filing Form 4868, we still recommend you download it or go through the process of filling it out through your software program. It will help you estimate the taxes you owe so you can pay them.
What if You Don’t Ask for an Extension?
If you don’t ask for an extension and don’t file on time, the IRS usually charges 5% of the taxes you owe each month your return is late, all the way up to 25%. If your return is more than 60 days late, the IRS will charge you a penalty of at least $135 or the entire balance of tax due on your return, whichever is smaller.
However, you might not owe the penalty if you have a reasonable explanation for filing late. Attach a statement to your return fully explaining the reason, but do not attach the statement to Form 4868. We suggest avoiding this option if possible! It’s just too risky.
You may get extra time to file even without filing an extension. Are you:
• Living outside the United States?
• Serving in a combat zone or a qualified hazardous duty area?
If so then contact your tax professional for help on what to do next or contact the IRS directly and explain that you are in one of these two categories.
When You’re Ready to File
Note any payment you made with your form 4868. You’ll enter this on:
• Line 68 on Form 1040
• Line 41 on Form 1040A, or
• Line 9 on Form 1040EZ
Finally, make sure that you file before October 15th, 2013 if you’ve gotten the extension! Otherwise it could cost you a lot more than just being penalized with interest!
For more information on filing an extension or to see what your options are if you can’t pay all your taxes on time, speak with a Beaton Accounting tax representative for professional advice on these tax matters and more! Call today for a FREE consultation: 631-921-6894.
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