Most of us have been there… only a month before April 15th tax filing deadline.
Yes, you’ve had months to prepare, but life gets in the way. You know that filing your taxes by the deadline just may not happen.
It might be time to consider filing an extension.
But what exactly does that mean? When should you consider filing one?
1. It’s a quick process but you still have to file a form.
Sometimes we just can’t avoid having big life events fall around fixed government deadlines like Tax Day. Whether you’re going to be out of town, you’re dealing with a new addition to the family, or mourning a loss, filing your taxes can easily fall to the bottom of the priority list. The great thing about a tax extension is that you receive an extra six months to file once you submit Form 4868. But you must submit the form; otherwise, you may be penalized for failure-to-file in an amount up to 25% of your owed taxes.
2. Sometimes the documentation you need to file comes after the deadline.
We can’t file our taxes without all the documentation needed, especially when it comes to getting timely 1099s or K-1s. Oftentimes there can be a delay in receiving these forms – especially if you are in partnerships – so it’s helpful to be able to file an extension until you get these forms.
3. An extension to file doesn’t mean an extension to pay!
We hate to break it to you, but if you were planning to file an extension because you can’t pay your taxes, you’re out of luck. An extension to file does not mean you get extra time to pay. If you don’t pay when you file your extension, you’ll be liable for penalties AND interest.
In other words, if you owe taxes, you’re going to be penalized and pay additional interest on the amount you owe.
THE BOTTOM LINE:
Filing a tax extension can alleviate a lot of stress, but it’s important to know about filing the proper form and having justified reasons for filing it. More importantly, you don’t get an extension to pay your taxes; filing an extension is literally asking for extra time to file the tax forms not the payment of taxes.