This blog post was originally published on March 28th, 2017. It has recently been updated to give the latest information on how to file for a tax extension, including relevant links.
The due date for your income tax return is coming up…fast. It’s less than a week away. But that doesn’t mean you’re ready to file it.
Maybe you don’t have all the information you need to complete your tax return. Or you just haven’t had time and energy to sit down and get it done.
Luckily there’s a super easy fix to keep you out of the IRS crosshairs if your tax return just can’t be done on time: File an extension.
Filing an Extension
If you won’t be able to complete and file your taxes by April 15th, you can request an automatic 4-month extension. You can file Form 4868: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return for free right through the IRS website. You can also find this form in whatever tax software you’re using.
And as long as you file the extension by April 15th, your federal tax return will not be considered late.
The form is very short (only about 3 inches long), and super easy to complete. You just need to fill in your name, address, Social Security number (and your spouse’s if you’re married and filing a joint return), and a little bit of math.
The math part includes a reasonable estimate of how much you think your tax bill will be, the amount you’ve already paid in, the difference, and the amount you’re paying with the extension.
It’s NOT an Extension of Time to Pay
Here’s the most important thing you need to know: This is an extension of time to file your tax return, NOT an extension of time to pay any taxes you owe.
When you’re figuring out how much to pay with your extension, make sure to account for all the tax payments you’ve already made, whether they were through payroll withholding or estimated tax payments. Doing that makes sure you don’t end up paying extra and then waiting months to get that money back – something most of us can’t afford.
If you expect to owe money, pay as much as you can with the extension. Whatever software you use to create the extension will let you decide on a payment amount. So if you don’t want to or can’t pay the full amount you expect to owe, pay whatever you can. The software will also let you enter banking information to make the payment.
If you can’t pay on the day you file the extension or want to pay with a credit card, you can do that separately. You can either log into your IRS online account and make a payment there. Or go to the IRS Make a Payment page and do it from there.
No idea how much you might owe? You can go with the safe harbor solution. As long as your total payments equal the same total amount you paid last year OR at least 90% of this year’s tax bill, you won’t get hit with an underpayment penalty. Even if your situation is very different than last year, going with last year’s tax bill makes sure you won’t face IRS penalties for not paying enough.
Failure to File Penalty
You may not realize that the IRS charges a Failure to File penalty if you don’t get your tax return or an extension in by the due date.
That penalty equals 5% of the total tax due (the amount you still owe) for every month the tax return is late. The full penalty maxes out at 25%, five months’ worth of being late. So if you owed $500, your penalty could go as high as $125.
There’s also a separate Failure to Pay penalty. They don’t double up – this penalty reduces the Failure to File penalty while both apply. The Failure to Pay penalty equals 0.5% of the unpaid tax bill, again up to a maximum of 25%.
What About My State Income Tax Return?
The rules for extensions on state tax returns vary by state. Some automatically count your federal extension as a state extension. Others require you fill out a state form. Whatever the state rules are, the extension – just like the federal one – gives you only extra time to file. Not extra time to pay.
You can find your state’s rules regarding extensions on their tax website, usually called either Department of Revenue (DOR) or Comptroller’s Office.
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