The April 15 tax filing deadline is just a few days away, so if you've yet to complete your return, now's the time to get moving. That said, if your return is complicated, or if you're missing key documents required to do your taxes, then you may have to accept the fact that you just won't make it in time for the deadline.
If that's the case, don't panic. The IRS will give you more time to submit your return if you aren't ready. All you need to do is request a tax extension.
How tax extensions work
Filers who need more time to get their taxes done can request an extension, and the IRS will grant it automatically. That's right -- you don't need to rack your brain to come up with a compelling excuse as to why you couldn't get your act together in time for the deadline. All you need to do is fill out Form 4868 and get it over to the IRS by April 15. Once you do, you'll automatically get an additional six months to submit your tax return, thereby extending your filing deadline to Oct. 15.
Keep in mind that Form 4868 only applies to federal taxes. If you need more time to file your state return, you'll need to research your state's rules, since they vary.
Now the good thing to keep in mind about tax extensions is that they take the failure-to-file penalty off the table. This penalty applies to filers who owe money to the IRS but don't submit their tax returns in time for the deadline. The failure-to-file penalty can be quite costly -- it's 5% of your unpaid tax debt per month or partial month your return is late, up to 25%.
That said, if you owe money on your taxes and file an extension, there is a penalty you'll need to worry about: the late payment penalty. Though a tax extension will give you more time to submit your return, it won't extend the deadline by which your tax bill is due. And if you're late with that payment, you'll face a late payment penalty equal to 0.5% of your unpaid taxes per month or partial month your tax bill is late, up to 25%.
Don't rush through the filing process
Rushing through the tax-filing process because you're pressed for time could cause you to make an error that works against you. For example, if you neglect to report income the IRS has a record of, it could land your name on the agency's audit list. Furthermore, if you're so hurried that you neglect to claim key tax credits or deductions, you could lose out on serious money.
Therefore, if you really can't finish your taxes by April 15, go ahead and get that extension. But don't use it as an excuse to procrastinate another six months. The longer it takes you to get your taxes in order, the more interest you risk racking up if it turns out you owe the IRS money. And if you're due a refund, the longer it takes to file your return, the longer you'll have to wait on that cash.