Ready or not, it’s tax time.
Whether you’re just completely slammed with a huge project for a client, or you’ve got a lot going on in your personal life, if you need some more time before you can file your taxes, we’re here to help.
The rules for filing extensions—and how they might affect you—vary greatly depending on your unique situation. Things like your level of income and whether you are getting a return or owe money, are just some of the factors you need to consider before you file a tax extension.
- Using Free File software is the quickest way to file an extension. Check out the IRS website to see some of the services that offer you the ability to quickly file for an extension.
- If you owe taxes, the annual deadline (this year, April 18, 2017) is still the last day to file without potentially incurring penalties or interest charges.
- To be eligible for Free File software, your gross adjusted income cannot exceed $64,000. The IRS suggests Free File Fillable forms for anyone who makes more than $64,000.
Free File Fillable Forms
- If your income is above $64,000, the IRS needs your last filed tax return, and state tax preparation is not available. According to the IRS website, you also “must know how to do your taxes yourself.”
- Check out the IRS’ user guide on Free File Fillable Forms (refer to page 15 in particular if you’re looking to file an extension).
- When filing for an extension using Free File Fillable Forms, you will be filling out Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.”
- Instructions on how to fill out the form are available here.
- Note: When you are filing an extension, you still might incur penalties or interest payments. Form 4868 allows for you to make a payment while filing an extension, which can save you from paying more in the long run.
Rules on when to file a tax extension
The rules for when to file an extension are spelled out on Form 4868 itself, and include some important things to note:
- U.S.. citizens or residents who happen to be outside of the U.S. at the moment are granted two extra months to file their returns and “pay any amount due without requesting an extension,” but interest will still be charged. There are different rules for military members, though, and there are other qualifying reasons why you can qualify for “special tax treatment,” so be sure to read the fine print.
- The total time allowed for an extension does not usually exceed six months.
- Form 4868 also explains that, the late payment penalty won’t be charged “if you can show reasonable cause for not paying on time.” You have to attach a statement to your return fully explaining the reason.
- If you pay at least 90 percent “on or before the regular due date of your return through withholding, estimated tax payments, or payments made with Form 4868,” and “the remaining balance is paid with your return,” then that is considered “reasonable cause” for you to not incur any penalties.
Potential penalties for late-filing
Besides a late payment penalty, there is also a penalty for filing late—so even if you’re going for an extension, be sure to do so before the due date. If you file late, you may be charged both the late filing penalty and the late payment penalties, incurring feeds that can add up quickly.
- The penalty for late payment is “generally 0.5 percent of your unpaid taxes per month,” but it can increase 25 percent of your unpaid taxes in some cases, according to the IRS.
- When both the late filing and late payment penalties apply, “the maximum amount charged for the two penalties is 5 percent per month.”
- There’s a minimum penalty if you’re more than 60 days late when filing: $205, “or, if you owe less than $205, 100 percent of the unpaid tax.”
Anyone who is considering filing a tax extension should heed the IRS warnings, keep themselves organized, and, even when filing an extension, be careful not to lose hard-earned income on penalties, interest fees, and the hassle of having to deal with the IRS for months after everything was due.
Note: The author of this article is not an accountant. All content is for informational purposes only. If you have questions regarding your own situation, consult with an accountant or the IRS.