Tax day is next Monday, and you haven't even started the filing process yet! If this sounds like you, you're not alone, Many people procrastinate submitting their tax return, but if you wait too long, you could find yourself unable to file by the April 15 deadline. Missing the deadline could mean big penalties for failure-to-file. Or you might rush through your taxes but make an error, which could trigger a dreaded audit.
It's better to be thorough on your tax return, so you need a good chunk of time to complete it, and double check everything before filing. The good news is, you have the option to get an extension on submitting your information to the Internal Revenue Service (IRS). But, if you're going to apply for an extension, you should know what you're getting into. Here are the details about how to ask for more time on your tax return, and it what it means when your request is granted.
How to request an extension on your tax return
Essentially every taxpayer can quickly and easily request an extension of time to file their tax return. In fact, requesting an extension is free. Simply submit one form: Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. As the name indicates, the extension is automatic. You submit the request and you get more time, regardless of your reasons for being late.
You don't even have to mail in your form to request an extension. The IRS recommends using free e-file to submit your request for a deadline extension. Anyone can submit their form electronically for free, regardless of their income.
Tax preparers or tax software programs can also submit your request for an extension. Or, you can submit a payment for outstanding taxes due using the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. If you use direct pay, you'll just need to indicate with your payment submission that the payment is for an extension and you won't need to file a separate form.
No matter what method you choose, you need to make your request for an extension before the April 15 tax deadline.
What happens when you request an extension to file taxes?
When you request an extension, you get more time to submit your 1040 form and the rest of your documentation to the IRS. You'll get until the 15th of October, or the next business day if the 15th falls on a weekend or a holiday. So, for your taxes due April 15, 2019, you'll have until Oct. 15, 2019 to submit your forms by filing a timely request for an extension.
This extended deadline doesn't just apply to your tax paperwork either. You also get until Oct. 15, 2019 to make tax-deductible contributions to a 401(k) or to an IRA for the past tax year. So, if you requested an extension to file your 2018 taxes and make a tax-deductible contribution to your IRA any time before Oct. 15, you could count that contribution as a 2018 deduction.
Unfortunately, the extension does not extend the time you have to pay your taxes -- only to file them. You are still expected to pay what you owe by April 15. If you miss this payment deadline, tax penalties and interest start accruing right away.
You owe a penalty of 0.5% of the unpaid tax amount due for each month, or part of a month, you're late in paying-- with the maximum penalty equal to 25% of your unpaid tax balance. The good news is, you can avoid this penalty if you pay at least 90% of what you owe before the April due date and you make sure your extension request is on time.
The bottom line is: While it's unpleasant to owe penalties and interest, it's a far better move to file on time even if you can't pay the tax bill. If you owe money to the IRS and you fail to file a return, you could face a penalty equal to 5% of the unpaid tax balance for each month, or part of a month, you're late in filing, with a maximum penalty of 25% of the unpaid balance. This is obviously a harsher consequence than the 0.5% penalty for paying late.
Request your extension ASAP if you can't get your taxes in on time
While you can wait to get your extension request in just before the April 15, there's no reason not to do it right now if you know you aren't going to be able to file your return on time.
Hopefully, you'll still be able to pay what's owed by the date your return is due even if you can't file on time -- but, no matter what, requesting an extension is a far better financial move than blowing off the filing deadline altogether.