If you need additional time to file your taxes this year, the Internal Revenue Service allows you to make an extension. This gives you another six months to complete your return. And while filing for an extension doesn't prevent you from paying your tax bill before the due date, there are several reasons why this might be the right option.
Here are the top reasons you should consider a tax extension this year.
You do not yet have all your tax and financial information.
For example, you might still be working on your books if you have a small business. Or you may be waiting for a letter confirming a charitable contribution. You may still need the basis of the shares you sold or a specific document from a financial institution. If you're waiting for essential information to help you file your return accurately, it's probably best to wait until you have that information.
An association or a partnership has not sent out forms.
If you are a Business Partner and are waiting to receive the Schedule K-1, you can file an extension and wait to receive this document.
You had an emergency that prevented you from completing and filing your return.
An unexpected hospitalization or prolonged illness, a family emergency, or even a critical work time can make filing a return difficult. No problem. Give yourself a little extra time for this important financial task.
You need more time to contribute or make changes to your retirement plan.
If you are planning on funding your retirement plan or starting a new one for the fiscal year, we recommend that you submit an extension to give you more time to complete this task. Contributions to an IRA are tax-deductible, which you can claim on your tax return to reduce your taxable income. Please note that you must make this decision before the submission deadline.
You want to make elections on your return, but you don't know which one is best until you speak to an expert.
If you have losses that can be carried back to previous years, you may not know by the end of this year if that's a good idea or if you should use the losses in a future tax return.
How do I file a tax extension?
A tax extension can be obtained by mail or electronically. You are required to request an extension to avoid a late filing penalty from the IRS.
Consider the free IRS file if you don't plan to use tax software or are still trying to decide which software to use. The Internal Revenue Service is partnering with an NGO called the Free File Alliance to give individuals earning less than $73,000 in adjusted gross income (AGI) access to free branded tax preparation software. Anyone, even taxpayers over the income limit, file for an extension online with the non-profit organization.
If you plan to use tax software, ensure your provider accepts Form 4868 for tax extensions. You can follow the program instructions and see how to e-file a tax extension this way. The Internal Revenue Service will send you an electronic receipt when you file the form.
You can also ask for a tax extension by filling out a paper form 4868 and mailing it in but ensuring to get proof that you mailed it.
Don't forget to file your return by the October Deadline.
Filing for a tax extension and making an estimated payment is only half the job. You are required to file your final return. Failure to file by the extension deadline could increase penalties and late fees.
FOR MORE INFORMATION ON HOW JIM McCLAFLIN, EA, NTPI FELLOW, CTRC CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLlICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Jim McClaflin, EA, NTPI Fellow, CTRC