Top 5 Things You Need to Know About Filing For a Tax Extension
The tax deadline is approaching and panic is starting to set in. You feel like there’s no way you can get everything together to submit in time, so what can you do? The good news is you can file a tax extension. While that might seem like the easy way out, there are some important things to know first. Here are the top five things you should know and how to file for a tax extension.
1. You must file a form
If you’re curious how to file for a tax extension, the first thing you should know is that you need to fill out a form. Yes, you must request an extension, it’s not automatically granted just because you’re late. You must fill out IRS Form 4868, which is an application for automatic extension of time to file for your individual tax return. You can file it on online or via snail mail, but save yourself some postage.
2. You still have to pay
If you need to figure out how to file for a tax extension and hoping that will be your saving grace from paying your taxes, think again. Just because you get an extension to file doesn’t mean you have more time to pay. Yep, that’s right, you still need to pay up, Uncle Sam wants his cut.
In fact, in order to qualify for the tax extension in the first place you must calculate your tax liability aka what you owe. You don’t need to share the reason for the extension but you must assess your tax liability to qualify.
3. You have six months to get it together
The good news is that you have six months to get your tax situation together. So you don’t have to file your taxes until October but don’t let that cause you to be lazy. You don’t need to take up the whole time, especially if you need to pay even with an extension. Only use the full extension if absolutely necessary. Tax time is already a pain, don’t delay the inevitable. But if you really need it, you do have six months.
4. There are payment plans available
So what if you need to learn how to file for a tax extension but you owe and can’t pay (gulp)? While you need to pay even if filing for an extension, if you can’t, there are payment plans available through the IRS.
If you are unable to pay, you may have up to 120 days to pay your tax liability back in full. Can’t swing that? You may be eligible for a monthly payment plan. In order to apply for a monthly payment plan, you will need to fill out Form 9465 or submit an application online.
There will be a fee for taxpayers who opt for a monthly payment plan. Depending on how low your income is, the fee may be waived or reduced.
5. Don’t take action? It will cost you
If you bury your head in the sand and decide to do nothing, there could be consequences. There are penalties for both failure to file and failure to pay and you may be charged interest. The cost of failing to file will be 5 percent of your unpaid taxes as well as other fees that are charged incrementally if you fail to pay.
In other words, there’s no really getting out of tax time. If you can get it together, file your return and pay if you owe something. If you can’t, be sure to request a tax extension and if you need a payment plan, apply for one and know how the costs will impact you.
Final word
If you can’t get your tax return submitted in time, use this guide to learn how to file for a tax extension. But remember, that doesn’t mean you’re off the hook. You still need to pay, either now or later, if you owe. To stay on top of things in the future, consider starting earlier. Not happy with having to owe? Or want to boost your check and not get a refund? Adjust your tax withholding on your W4. Whatever the case may be, take action!