Nobody likes doing taxes, but if procrastination has reared its ugly head, and you fear you won't have your return ready in time for the deadline, you can always ask the IRS for a tax extension. Submitting a tax extension form is easy. All you need to do is fill out Form 4868 and then file it by the tax filing deadline. Once you submit your request -- which you can quickly do online -- you get an extra six months to file your tax return.
But while requesting a tax extension pushes back your filing deadline and gives you more time to get your paperwork in order, it doesn't exempt you from paying the IRS what you owe by the regular tax filing deadline. Waiting six months to make good on your tax debt could result in some pretty hefty penalties, so don't be fooled into thinking your extension gives you more time to pay.
Reasons to request a tax extension
Technically speaking, you don't need an actual reason to file for a tax extension. As long as you get your request in by the tax filing deadline, the IRS will grant it automatically. You might consider a tax extension if one of the following circumstances applies to you:
- You're missing key paperwork or documentation that will determine the accuracy of your return
- You thought you could do your taxes on your own and come to realize you need outside help at the last minute
- You've fallen ill or encountered an emergency situation where focusing on your taxes just isn't feasible
- You're up against the clock and worry you'll make a mistake by rushing through the process
Now here's a bad reason for requesting a tax extension: not being able to pay your tax bill. If you fear you owe money to the IRS and want more time to pay off your debt, an extension won't grant you that. In fact, if you fail to pay your tax bill in full, the IRS will impose a penalty equal to 0.5% of what you owe per month, up to a maximum of 25%. That's why you're better off paying what you can by the original filing deadline, even if you're not planning to submit your actual return for another six months. (Of course, estimating your tax bill is easier said than done with an incomplete return, but if that's the situation you're facing, just do your best.)
Another thing to keep in mind is that if you owe the IRS money and don't submit your return by the original filing deadline, or request an extension by that deadline, you'll face a late filing penalty that can be far more severe than the penalty for paying late. Specifically, not filing your return or getting that extension will cost you 5% of your unpaid tax bill per month, up to a maximum of 25%. Ouch.
More flexibility without the fuss
If you need more time to get your taxes together, there really isn't too much of a downside to filing for an extension. Contrary to what you may have heard, getting an extension won't increase your audit risk, nor will it cost you any money to file Form 4868. Also remember that just because you're granted an extension doesn't mean you can't file your return on time. If you ask for more time and manage to complete your return by the original deadline, you can always submit it on schedule. This way, if you are due a refund, you won't have to wait longer than necessary to get your hands on your money.