Coming up soon – the extension deadline for income tax returns, which is October 15th for individual returns and September 15th for most business returns. (Sorry if you thought this post was about beauty tips or hair accessories).
If you’re one of the millions of American taxpayers who, for various reasons, simply could not complete and file their tax returns back on April 15th, you were wise to take advantage of a simple and free opportunity to wait a while to get the paperwork completed. Filing that extension (usually Form 4868) is as simple as the click of a button, and there is no penalty or cost for filing an extension – other than whatever fee your software or tax preparer may charge. You don’t even have to explain that you’re just waiting for that one tax document that hasn’t arrived on time, or that your accountant retired and disappeared right before tax season, or that you’re just tired and not in the mood … no explanation is required. But here are two very important things to remember:
First – There is absolutely no extension for the deadline for filing an extension, so be certain that you have filed the extension by the original filing deadline (April 15th). If you haven’t, you have missed your opportunity and the clock begins ticking on your late filing penalty.
Second – and this is the big “Gotcha” – it is only your tax returns, the paper or online document (Form 1040) that you send to the IRS, that is extended, NOT the taxes due! If you complete your tax return and file it by the extension deadline – great, no late filing penalty. If that tax return shows that you owe the IRS a tax payment, that payment was due back on April 15th, so you will have a late payment penalty and interest to pay.
1. File on time if you can. Sometimes it’s outside of your control, but if you have all your documents and just don’t feel like it – do it anyway. Could save you some money, or even get your refund to you sooner, and you’ll offload the anxiety.
2. If you must file an extension, you are allowed to estimate what you think your tax will be and you can send that payment in with your extension on April 15th. Even if you estimate wrong, the penalty and interest won’t apply to the amount that you sent on time. Or you may get some of it back if you overestimated.
Work with your accountant or tax preparer to use the extension process to your benefit.