Despite the fact that tax season comes around the same time every year in April (for 2019, it’s April 15), about 10 million taxpayers still file for a tax extension every year.If you’ve put off your taxes and realize you don’t have enough time to file, don’t panic. Filing for an extension is simple and it’s much better to do this than rush through your return. Save the stress this tax season and use our quick step-by-step guide to file your tax extension.
Overview: Tax Extensions
The IRS understands that there are a number of valid reasons why you may need extra time to file your taxes, and for most people, filing for an extension takes little more than a few minutes. When you file for a tax extension, you’ll be granted an additional six months to file. Requests for extensions are usually granted automatically as long as you’ve filled out the correct form. This extra window of time can be a powerful tool for contractors who wait on documents from clients, investors who are have to calculate their capital gains taxes for the year, and charitable givers who collect end-of-the-year receipts for their gift tax returns. Filing for an extension does not increase your chances of being audited.Contrary to popular belief, a tax extension is not an extension to pay—it’s only an extension to file. You’ll still need to make an estimation of how much you owe and make a payment by Tax Day. However, filing for an extension can help you avoid penalties and fees if you can’t afford to pay in full by the deadline.
How to File For a Tax Extension
Follow our step-by-step layout for the correct process on filing your tax extensions.
Step 1: Understand Any Special Circumstances
Though the vast majority of Americans will have their requests to file an extension approved within six months, there are a few special circumstances that forbid, extend or limit the amount of extra time you will receive to file. If you live outside of the United States, or you are currently an active-duty armed forces member residing in a combat zone or other qualified hazardous area, you may receive more time to file your taxes when you request an extension. On the other hand, if you have been approved for offers in compromise through the IRS, you must file by Tax Day during the five-year probationary period after your approval. If you fail to file on or before the deadline, the IRS may revoke your offer in compromise and reinstate the original balance owed.
Step 2: Estimate How Much You Owe
If you fail to make a payment before the deadline, you will be charged 0.5% interest monthly on what you owe. This interest can quickly compound, so make sure you make an estimated payment before the due date. You can estimate how much you owe in taxes this year by subtracting the total tax withheld from your paycheck and your estimated tax payments from the total amount you’ve earned according to the percentage indicated in your tax bracket. Remember to reduce your income by all qualified deductibles and don’t forget to add calculations for tax credits you qualify for into your final payment. If you owe money and you cannot pay the full amount, you should attempt to pay as much of your outstanding balance as you can.
Step 3: Choose the Correct Form
For most Americans with simple full-time or part-time employment, Form 4868 will grant an automatic six-month extension for filing as soon as it is received and processed. You can download a copy of Form 4868 from IRS.gov. If you use tax software to complete your return, your software provider may also make this form easily accessible through its website. If you use tax prep software, your system may have a built-in link to help you file an extension. For example, TurboTax’s EasyExtension tool is free to use and eliminates the need to print out and mail your Form 4868.
If you are a business owner, you’ll want to fill out Form 7004. If you own a corporation, you’ll need to fill out form 1138. Both of these forms can be accessed and electronically downloaded from the IRS’s website.
Step 4: Fill Out the Form and Mail It In
Form 4868 is incredibly easy to fill out and requires minimal information:
- Your name,
- Social security number
- Estimated payment.
Download and print out Form 4868, fill it out, and mail it to the IRS address indicated on the instructions for your area with a check addressed to the U.S. Treasury for the amount that you owe. If you’d prefer to file your extension online, you can do so through the IRS’s website. If you file online, you can use one of the IRS’s approved payment methods to cover your estimated tax liability. Approved payment methods include credit cards, debit cards, and same-day bank wire transfers.
Where To File Your Taxes After Your Extension
After you’ve filed for an extension, you’ll need to decide when and where you’d like to file. While a certified public accountant (CPA) can help you file your taxes correctly and maximize deductions, most Americans can save money by doing their own taxes at home using a program like TurboTax or H&R Block Federal Free Edition. Tax software is easy to use and many companies even offer free federal versions to help you file simple federal income tax returns. For more complicated employment situations, you’ll want to consider a more sophisticated paid version of your favorite tax software program. Business owners and independent contractors, investors who need to mitigate brokerage taxes and investment taxes, and those who have recently changed employment situations, purchased a home, or had a child are especially encouraged to use more advanced tax software to maximize their deductions and take advantage of every possible credit that to lower the tax burden.
If there’s any doubt in your mind that you might not be able to file your taxes before Tax Day, it’s best to file an extension. Your taxes are not a homework assignment—there are no penalties when you take advantage of an extension, you won’t be charged an additional fee so long as you make the right estimated quarterly payment and you’ll have more time to ensure that you’ve correctly filled out all of your forms and submitted the right payment method. Filing an extension also gives you additional time to search for deductions and credits that fit your lifestyle, so don’t be afraid to file and make good use of your extra six months.