We know, we know: Taxes take time.
And sometimes, you can’t get around to filing your taxes by the April deadline (which, this year, because of a weekend and a holiday, is Tuesday, April 17).
Of course, you’re not the first person to land in this predicament. Every year, about 7% of taxpayers file for a six-month extension.
But if this is the first year you find yourself in this group, read on to find everything you need to know about filing an extension.
First, an Extension Is Not an Extension to Pay
Filing for an extension means you get an extension to file the paperwork. You must still pay what you estimate you owe, however. If you don’t pay on time, the IRS will charge you interest and maybe even penalties that could increase your tax bill by 25% or more. If you have time to file the paperwork, but you don’t quite have the funds to pay, then read this article for your options.
How to Get More Time
Asking for an extension isn’t like college where you had to make your case (read: beg) your professor for more time to turn in your term paper. The IRS calls it an automatic extension for a reason: They will automatically grant it if you ask.
First, estimate your taxes. Fill out as much of your 1040 as you can (find out which 1040 to use). You’ll use the figure from there to fill out Form 4868. Then, choose from these three options to file the extension:
1. Electronically file Form 4868 with your tax preparer or your tax software program (like the H&R Block program that comes free with the Ace Your Taxes Bootcamp).
2. Send in Form 4868 to the IRS by snail mail.
3. Pay your estimated taxes using a credit or debit card. You can do this online or by phone, and you must pay at least $1. Even if you are not filing Form 4868, we still recommend you download it or go through the process of filling it out through your software program. It will help you estimate the taxes you owe so you can pay them.
Whatever option you choose, you need to e-file, postmark the physical copy of Form 4868, or pay your estimated taxes by April 17th this year. Form 4868 tells you exactly where to send it if you’re going by snail mail.
What if You Don’t Ask for an Extension?
If you don’t ask for an extension and don’t file on time, the IRS usually charges 5% of the taxes you owe each month your return is late, all the way up to 25%. If your return is more than 60 days late, the IRS will charge you a penalty of at least $135 or the entire balance of tax due on your return, whichever is smaller.
However, you might not owe the penalty if you have a reasonable explanation for filing late. Attach a statement to your return fully explaining the reason, but do not attach the statement to Form 4868. We suggest avoiding this option if possible! It’s a risky strategy.
You may get extra time to file even without filing an extension if you are:
• Living outside the United States? Learn more.
• Serving in a combat zone or a qualified hazardous duty area? Learn more.
When You’re Ready to File
Note any payment you made with your form 4868. You’ll enter this on:
• Line 68 on Form 1040
• Line 41 on Form 1040A, or
• Line 9 on Form 1040EZ
And make sure to file before October 15th, 2012 if you’ve gotten the extension!
More on Taxes From LearnVest
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We have cheat sheets on taxes for homeowners, parents, and people paying tuition.
Beware of rapid refunds! They’re aren’t what they look like.