Last Minute Deadline Blues? Extend Your Filing Due Date Until October 15
If there is no possible way you will finish your tax return by midnight, April 17, join 10 millions of your fellow Americans and request an automatic six-month filing (but not payment) extension.
Individual taxpayers who are unable to complete their tax paperwork by April 17 can get an automatic extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return.
Tip. Procrastination is not the only reason for needing an extension. You may be required to report income from Schedules K-1 issued by S corporations or partnerships. Many times, the entity will not get the required statements to you enough in advance for your to incorporate them into your Form 1040. Other people find that they have misplaced documents that contain vital pieces of return information--such as Forms 1099-INT statements.
While you can "ballpark" the numbers for purposes of making the payment due with the extension, you will want to have accurate numbers on your actual return. In both these situations, filing the automatic extension is far wiser than having to file an amended return. Another excellent reason to consider an extension is if you made a Roth IRA conversion and you are having second thoughts. Because you can "recharacterize" the conversion and avoid paying the tax flowing from the conversion at any time prior to filing your tax return, an extension gives you an extra six months to see if the conversion makes sense.
Your extension request must be filed by April 17th. The extension gives you until October 15, 2012 to submit your tax return. However, this is only a "paperwork" extension, not a "payment" extension. If you owe any taxes, you still have to submit the amount you owe on April 17, or face interest and penalties charges on the unpaid amount.
How to File for the Extension
The quickest and easier way to get an extension is to electronically file Form 4868 using IRS Free File, which is free to everyone, regardless of income, or using most commercial tax preparation software. You can also file a paper version of Form 4868, which is available for download from the IRS web site. If you e-file, whether using Free File or your own software, the IRS will provide an acknowledgement of your extension request. However, if you file a paper request, you won't receive an acknowledgment.
What If You Can File, But Not Pay?
Too many people land themselves in deep trouble by failing to file their tax returns because they can't come up with the tax owed by the return's due date. Failing to file only makes a bad situation much worse.
Instead, file your return on time. (Don't bother applying for an extension, because that doesn't get you more time to pay, only more time to complete all the paperwork.) Pay as much as you can when you file your return--this will lower the amount of interest and penalties that you will wind up owing.
The IRS will send you a notice that informs you of the balance due. You have the option of entering into an installment agreement or requesting an Offer in Compromise either when you file your return or when you receive the notice (bill) from the IRS showing the amount due.
Think Ahead. The IRS suggests that you evaluate the cost of getting a loan or using your charge card to pay off your tax debt, rather than entering into an installment agreement with them. While you are making installment payments under an IRS plan, interest (currently, 4 percent) and the failure to pay penalty (up to 1 percent per month) are charged on the remaining balance. With a 36-year installment agreement on a $10,000 tax debt, you will pay over $2,000 in penalties and interest. In contrast, you'd pay around $1,000 in interest on a 7 percent bank loan--that's a $1,000 savings by choosing a loan over an installment agreement.