What You Need to Know about Filing a Tax Extension
It’s that time of year again. The time when people start scrambling to get their taxes done. But what if you’re not ready? What if you don’t think you can get your taxes done by the April 15th deadline? Should you file a tax extension?
Before you make a decision, it’s important to understand what a tax extension is and how it works. This guide will provide you with everything you need to know about filing for a tax extension, so you can make the best decision for your situation.
What Is a Tax Extension?
A tax extension is an extension of the deadline to file your taxes. It allows you to file your taxes later than the April 15th deadline.
How Does It Work?
When you file for a tax extension, you are essentially asking the IRS for more time to file your taxes. You will need to fill out a form (Form 4868) and submit it to the IRS. Once you have done this, you will have until October 18th to file your taxes.
It’s important to note that a tax extension does not give you more time to pay your taxes. If you owe taxes, you will need to pay them by April 15th. If you don’t, you will be subject to interest and penalties.
Reasons to File for a Tax Extension
There are a few different situations in which it might make sense to file for a tax extension.
1. You’re Not Ready to File Your Taxes
If you’re simply not ready to file your taxes, then a tax extension can give you the extra time you need.
2. You Need More Time to Gather Information
If you’re missing information or documents that you need to complete your taxes, then a tax extension can give you the time you need to track them down.
3. You Can’t Pay Your Taxes
If you can’t pay your taxes, then it might make sense to file for a tax extension. This way, you can avoid interest and penalties on the amount you owe.
4. You’re Facing a Hardship
If you’re facing a hardship, such as a natural disaster or the death of a loved one, then you might be eligible for a hardship extension. This would give you additional time to file your taxes.
5. You’ll Be Out of Town during Tax Season
If you’ll be out of town during tax season, you might want to file for a tax extension. One of the benefits of filing for a tax extension is that it gives you an extra six months to file your taxes. If you’re going to be out of town during tax season, this could come in handy.
Are There Consequences to Filing a Tax Extension?
If you do not pay the tax you owe by the tax filing date, regardless of when you file your tax return, the IRS penalties can be substantial. The IRS will charge you half a percent every month on any tax you owe after the deadline.
If you do not file your return by the extension date, the IRS penalty increases to 5% every month, with a maximum penalty of 25%. Making a tax payment with your debit card before the filing date is a simple approach to avoid the penalty. This payment method will act as your extension application, and you will not need to complete Form 4868.
There are a few key things to remember if you are considering filing a tax extension. First, you will need to file Form 4868 with the IRS. This form can be found on the IRS website. Second, you will need to estimate your tax liability. This can be done by using last year’s tax return or by using the IRS’s online calculator. Third, you will need to make a payment for any taxes you owe. This can be done by credit card, check, or money order. Finally, remember that an extension is not an extension to pay your taxes. You will still need to pay your taxes by the April deadline.
Ash CPA is a professional team of accountants in Framingham, MA, that can help you with all your tax needs. We have years of experience preparing taxes for individuals and businesses, and we can assist you in maximizing your refunds and minimize your liabilities. Let us get the best possible outcome for your tax situation. Contact us today to get started!