So you haven’t filed your taxes yet? What have you been doing for the entire first quarter of the year?
OK, I’ll put my scolding face away. Everyone has different circumstances. That’s why tax extensions exist.
Worried about missing the deadline? In a panic about your taxes?
Read on for a quick guide on how to file an extension.
How to File for a Tax Extension
You can’t get an extension unless you ask, and you have to do it before tax day!
Asking for an extension gives you an extra six months to file your tax return.
IRS Form 4868 is the magic ticket to a (temporary) reprieve from dealing with your tax return.
The extension request form doesn’t ask why you want an extension. You’ll estimate your tax liability for the year, input your payments (if you made any) and calculate any balance you have due to Uncle Sam.
The IRS also allows you to file for an extension for free using TaxSlayer, TurboTax or a number of other free filing software options it lists online.
Guess What: You Still Have to Pay
The bummer? Filing for an extension doesn’t give you more time to pay any taxes you have due. Those payments are still due April 15 — or you’ll incur fees and penalties.
Quick Sidebar on Interest and Fees, Because I Know You’re Wondering
Usually, the IRS explains, the late payment penalty is half of 1% of unpaid taxes after April 15. The IRS charges this penalty monthly and caps it at 25% of the amount of unpaid taxes. But if you pay more than 60 days late, you’re also on the hook for a minimum penalty of $210 or 100% of the taxes owed — whichever is less.
Yikes.
When you file for an extension online, you’ll have the option to pay all or part of your estimated income tax due. If you don’t pay in full right away, you’ll accrue interest on any tax owed.
Interest on your unpaid taxes starts to accrue April 15, even if you have the two-month extension for being out of the country. The IRS’ interest rate is 3% plus the federal short-term rate, which the IRS updates quarterly — the interest compounds daily.
“The interest runs until you pay the tax,” Form 4868 warns. “Even if you had a good reason for not paying on time, you will still owe interest.”
(Yes, that is the IRS mean-mugging you through a form.)
If you want an extension and make an electronic payment before the regular tax deadline, you don’t have to file Form 4868 to formally request an extension. You’ll automatically get an extension when you make that partial or full payment through IRS Direct Pay and select “extension” from the “Reason For Payment” drop-down menu.
If you prefer to pay via credit or debit card through the Electronic Federal Payment System, you can get the automatic extension by selecting “extension” in the “Tax Type” menu.
The IRS says it will only contact you if it denies your old-fashioned, paper-submitted request.
There is a way to avoid a late payment penalty if you wait to pay your taxes when you file your extended return.
When you file your return, you can attach a statement explaining the reason you didn’t pay on time, according to the instructions for Form 4868. If you satisfy both of the following conditions when you complete your tax return, the IRS is likely to waive your penalty:
- You pay at least 90% of the total tax on your return before the due date via withholding, estimated tax payments, or payments you made when filing for your extension, and
- You pay the remaining balance when you file your return.
What if You’re Out of the Country?
If you’re a U.S. citizen or resident who’s out of the country at tax time, you automatically get an extra two months to file your tax return — no need to file an extension. Need more time? File an extension with Form 4868 or through one of the e-filing options, and you’ll get an additional four months to complete your return.
But the payment rules are the same for world travelers: If you’ll owe taxes but don’t make a payment before April 15, you’ll have to pay interest like the rest of us.
The key to surviving tax season, whether you started crunching numbers in January or are still hyperventilating while reading this article, is this:
Don’t hide from the IRS. Most of us pay taxes and share the task of filing tax returns. And just about everyone has questions about how to do it right — and what to do if you feel like you’re in financial trouble at tax time. The worst move is to pretend your problem doesn’t exist and hope you fly under the radar.
Don’t be afraid to call the IRS with your questions or concerns: Its agents have heard everything. I promise.
Lisa Rowan is a former staff writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
source The Penny Hoarder http://bit.ly/2WTw2PZ
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