Deadlines are stressful and so are taxes.
When you combine the two, you get tax season. But what happens when you get too
close to the deadline and still have not organized your information? Do you beg a tax
preparer to take you? Do you have any other options? What about getting a tax extension?
Tax Extensions allow you to file your tax 6 months after the original deadline. Below are
some things to take into consideration before deciding to file a tax extension.
When do I need to file a tax extension?
A tax extension needs to be submitted by April 17, 2018, to be considered timely.
You can submit an extension using the Form 4868 Application for Automatic Extension
of Time and mailing that in, by using tax software, or through a tax professional. If you
are mailing make sure that your form get’s postmarked by April 17, 2018.
What is an extension and does that mean I have more time to pay my taxes?
An extension is an extension to file your return, not an extension to pay. Your taxes are
still due on April 17 (Tax Day) and interest and penalties may be implemented if you don’t. If you
do need more time to pay, we recommend getting on a payment plan with the IRS or
asking for an interest-free extension. You can do this all online but you would need to
have filed your taxes on time, which is another great reason to file on time.
What are penalties if I don’t pay on time?
If you pay within a few weeks, it can be pennies on the dollar of what you owe in tax.
However, this depends on how much you owe. Fees and penalties start increasing when
you owe over a few thousand. The late filing fee begins with 5% of the additional taxes for every month you are late. If you file more than 60 days past the filing date, the fee can be up to an additional 100% of the unpaid taxes.
When does it make sense to file an extension?
It usually makes sense to get an extension when you want more time to review or decide
on details that will impact your tax return.
- You have a general idea of what you’ll owe (or get back), you can pay your taxes
on or before the deadline, but want more time to review whether you’re missing
some key deductions.
- If you want to fund your IRA and want an extension to properly fund that account.
- You think you’ll only owe a couple hundred but want to file later.
- If you expect a refund and don’t have time to file your taxes yet.
When does it NOT make sense to file a tax extension?
When you have no idea what your tax situation is and have no clue what you’re going to
owe. In that case, get a calculator, get on tax software, or connect with a pro to get a
ballpark idea based on your tax situation. You’re going to have to face the music anyway,
why not be proactive about deductions and tracking.
How do I learn more or get help with my extension?