What You Need to Know About Filing an Extension for Taxes
Extensions can be very helpful. However, there’s a catch. You are NOT extending your deadline for paying your tax. You are only extending the deadline for filing your return. Your tax payment is still due
Filing a tax extension is a simple concept. Instead of filing your tax return by April 17th, you are requesting to extend your deadline. The extension runs until October 15th for personal taxes or September 15th for your business taxes.
The Most Important Thing to Remember About Filing an Extension!
Extensions can be very helpful. However, there’s a catch. You are NOT extending your deadline for paying your tax. You are only extending the deadline for filing your return. Your tax payment is still due by April 17th.
Benefits of Filing a Tax Extension
If you get an extension, you get 6 more months to finish up your tax return. This can be helpful if:
- Your itemized tax deductions are very complex and you need more time to organize them
- You’re filing a gift tax return for the transfer of property between you or a friend/non-spouse family member
- You’re waiting for important tax documents to arrive from your employer or other entity
- You don’t have the full amount of funds to pay the tax due and you want to decrease penalties (remember, your tax payment is still due April 17th, but if you simply don’t have the money, then you can reduce your penalties by extending)
- You want to save money on accountant fees (the fees are usually higher during tax season)
- You’re self-employed and trying to fund your retirement plan
- You want to preserve your tax refunds if you get behind on your tax returns
- You are still trying to decide on certain details of your tax return
- You’re considering changing your IRA, but you’re not sure what you’re eligible for yet
- You don’t want to rush through everything and risk errors
Potential Problems with Filing a Tax Extension
As mentioned above, the biggest “potential problem” is that you still must pay your taxes by the original due date, even if you don’t have to file your return right away. Here are some other potential issues:
- An extension doesn’t allow married couples to switch from joint to separate returns, so if this is one of the decisions you’re struggling to make, an extension will not help
- You can’t extend the deadline for Traditional IRA or Roth IRA contributions. They’re still due in April.
- Under specific, rare circumstances, some people are not eligible for an extension.
These problems may or may not apply to you. If you think an extension would help you personally, then there’s good news for you: it’s easy to file!
How to File an Extension
The IRS makes it simple for individual and business taxpayers. Individuals will use Form 4848, while businesses will use Form 7004. Both forms are easily accessible on the IRS.gov website. Simply fill it out, submit it, and you should be good to go. While some situations might make you ineligible for an extension, the vast majority of taxpayers are eligible. Go forth and file your extension!