If you think you're going to need a tax extension for the upcoming year, for whatever reason, now is the time to learn how the system works and what form you need to file.
Here's what you should know about filing a tax extension for your personal return:
First things first: the document in question is Form 4868 (Application for Automatic Extension of Time to File U.S Individual Income Tax Return). You'll need to get a hard-copy or download one from the Internet.
You can send the form in or file it the smart way, electronically. When you e-file your 4868, the IRS will notify you via email whether it's been accepted or rejected. Paper filers will only hear back from the IRS if the application for extension is rejected.
The 4868 is a simple document, as IRS forms go. On it, you'll just need to include your name and social security number, along with an estimate of how much tax you will owe. There's also a space to record how much tax you already paid. Note that unless you owe an exorbitant amount of tax, or fill out the form incorrectly, the IRS will in all likelihood approve your request for extension.
Even though the IRS is very lenient about granting 6-month extensions, note that it is quite rare for them to approve any additional extensions. The deadline for filing the 4868 is the same day your regular return is due in April. You'll now have until mid-October to file and pay your taxes. (If you use the paper mail-in form, then the envelope must be postmarked by the typical April tax due date. Email filers must get their electronic form in by midnight of the regular April tax day.
The 4868 is an extension to file, not an extension to pay. There are two basic penalties here: failure to pay and failure to file. By getting an extension, you have six more months to file, and thus can easily avoid the late-filer penalty. But unless you pay 90 percent or more of your estimated tax due on the regular April filing date, you will be assessed the late-payment penalty, along with interest, when you finally do file and pay your taxes later on.
If you are having trouble locating documents, or have personal problems that prevent you from filing on time, an extension can be an ideal way to deal with the challenge. Keep in mind that you can, and should if possible, pay as much of the tax you owe by the April filing date. You can pay tax when you file your extension.
ALJ Business services has a team of tax professionals that can help you with a tax extension and much more. Whether you need assistance with payroll taxes, small business accounting, financial statements, payroll or any accounting or tax-related challenge, ALJ has the expertise to help.
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