How do I file for a tax extension?
Sometimes you just need more time. More time to gather documents and find deductions that can save you lots of money. Getting an extension isn’t as hard as it sounds, but you still need to pay by April 17th in order to not face fines or penalties.
So, how do I get more time?
You can apply for an extension either online, or by mail by sending in Form 4868 with a check for your owed tax (postmarked by April 17th). See the IRS instructions for filing an extension (and paying your owed tax!) here.
How much should I pay?
Not sure how much you'll owe in taxes? Pay how much you think you’ll owe based on previous years' tax returns, or based on your income estimates for the year.
It’s better to overpay to avoid any fines for underpaying. Don’t worry, you’ll get back what you overpay in the form of a refund. Use tax softwares like H&R Block or TurboTax to determine roughly how much you owe, but stop short of actual filing.
Is getting an extension free?
Yes! You can file for an extension for free, but you still have to send in payment for how much you think you’ll owe in taxes.
How much time will it give me?
You’ll now have 6 more months to gather your tax information, dig up deductions, and find proof of them. Your new deadline to file is October 15, 2018.
What if I can’t pay what I owe?
Don’t worry — you’re not alone! A lot of folks are surprised to owe more than they expected. Many people choose to pay their liability with a credit card using IRS approved services like PayTaxUSA, Official Payments, or Pay1040.com. These services typically charge a fee for using a card.
As another option, the IRS offers installment plans where you can pay your tax liability in monthly installments. Call them to determine what path forward is right for you: 1-800-829-1040 or apply online. Depending on your situation, there are one-time set up fees to establish monthly payments ranging from $0 to $225.
What if I just file and pay late?
This is a very very bad idea, and you’ll definitely pay more than what you owe. There are three penalties you risk when you don’t file and pay on time.
- Filing Penalty: 5% of tax due for every month that you don’t file your income tax return, up to 25%. You face a state filing penalty on top of this that varies by state.
- Payment Penalty: .5% of tax due for every month that you don’t file, up to 25% (Both the late filing and late payment penalties can be applied at the same time.)
- Interest: the IRS will also charge interest on the tax that you owe. Interest starts accruing on the due date of your return, and is generally the same as the federal short-term interest rate plus 3%
This means that if you owe $2000 and don’t pay or file until three months after April 17th, you’ll owe $330 in penalties on top of the $2000 you owe.
Heads up: It’s better to file and pay something even if you haven’t applied for an extension. You can amend your return in the future and also pay the remainder that you owe. Doing so will lower penalties (especially the late filing penalty, which is 10 times higher than the late payment penalty).
Expecting a refund?
Even if you file for an extension, you'll still get your refund within about 3 weeks of filing your tax return.
If you end up filing your taxes late, you'll still be eligible for a refund! You're eligible to receive a refund for up to three years after the tax filing deadline for a particular tax year. So if you haven't filed your 2015 tax return, you could still get a refund by sending in your tax forms as soon as possible!
Disclaimer: The information contained in this Guide is not offered as legal or tax advice. The U.S. federal income tax discussion included in this Guide is for general information purposes only and is not a complete analysis or discussion of all potential tax consequences that may be relevant to a particular individual. In light of the foregoing, each individual should consult with and seek advice from such individual’s own tax advisor with respect to the tax consequences discussed herein. Any information contained in this Guide is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the U.S. Internal Revenue Code of 1986, as amended.