There are plenty of reasons you may need a tax extension this year which, in general, the government will accept unless there’s an extraordinary circumstance. However, there are a few important things to keep in mind if you’re going to take that route. After weighing some of the pros and cons, there are things you need to know should you choose to file for a tax extension this year.
So, You Didn’t File Your Taxes on Time. Now What?
Regardless of the reason your taxes may not have gotten in on time, there are a few things that will happen. The first thing to keep in mind is that any money you would have gotten for a refund will be lost if you don’t file within a maximum of three years from the April 15th deadline. On the flipside, if you owe any amount of money to the government, you’re likely to fall prey to the failure-to-file penalty. This penalty is 5% of your unpaid taxes which will be added to what you already owe, per month, up to 25%. Though you’ll receive several reminders from the IRS that you need to file, at a certain point they may proceed to file a substitute return for you. However, this isn’t ideal as they may not take into consideration every deduction or credit you’ve earned.
How to Get an Extension
If you’ve decided that getting an extension is the best option for you, there are three ways to go about it:
Through the mail.
To submit via mail, print and fill out the IRS form 4868. However, due to the nature of the US postal service, it’s best to keep some documentation that you’ve mailed it, to prevent further conflict with the IRS.
Most tax software will allow you to file for an extension via the program or you could always fill out the same form on the actual IRS website.
IRS’s Free File site.
Just remember, the IRS website doesn’t offer the extension form year-round, so if you need it, it’s best to fill it out in April, or as close as you can.
What Does Getting an Extension Really Do?
The most important thing to keep in mind is that an extension doesn’t mean that you have more time to pay. It only means that you have longer to file your return, so it’s best to estimate your bill and try to pay as much as possible. If you manage to pay at least 80% of your tax liability by the April deadline, as well as pay the rest with your return, you may be able to avoid the late-payment penalty. The extension gives you until October to file your completed return, at which time complete payment will be due, with the possibility of a more substantial penalty if missed.
If tax time snuck up on you and you are unprepared, get help. Elias Dsouza of Dsouza Legal Group has been helping people like you navigate their tax issues for over 15 years.