How to Get an Extension on Your Tax Return

Taxes are something everyone has to deal with eventually. Some people even take paying taxes as a badge of pride — you just don’t feel like an adult until that first return. However, if you’ve been paying taxes for a while, you might run into a year where you really need more time to get your taxes in order. This could be because you just haven’t thought about them, or you’ve gotten some new deductions that you want to make sure are claimed the proper way. Why pay ore taxes than you otherwise have to? According to the IRS, it’s not a crime at all to use appropriate deductions, investment vehicles, and tax shelters to cover part of your income. In other words, playing by the rules can be pretty profitable and easier on your wallet than you might expect.

So let’s follow up with another “rule”: you need to file an extension if you need more time to do a proper job.

Now, keep in mind that an extension and payment plans are two different animals. You will still need to try to pay as much as possible when you send in your extension request. You can get an automatic 6 month extension, which would essentially give you until October 15 (October 18th, this year due to the DC holiday) to get things in line. For paying your taxes, you’ll need to make sure that you send in at least 90% of what you owe for this tax year, or what you owed for your past tax year — 100% of that. This can be beneficial for business owners that are expecting a higher tax liability due to a massive business boost, but paid less in taxes 2 years ago. It can make sense to pay 100% of a smaller amount, and then have your CPA or another tax preparation professional handle your taxes properly in October.

Remember that this is a busy season for tax professionals. You’re going to find a lot of sighs of relief if you can extend the time necessary to prepare your taxes. In fact, this can give the tax prepare additional time to really give your return the love and attention it needs. What, you didn’t know that taxes need love too?

Keep in mind as well that this article is geared more or less for people that honestly owe taxes. If you are expecting a refund, well… it’s more important to get that refund return filed right away. E-file is better than paper, and leads to faster processing. Don’t forget direct deposit, which you can do even if you don’t have a bank account — most pre-paid debit cards have this ability in spades, so don’t skip over this little fact.

The form in question is going to be form 4868, and you’ll want to look up the forms for your tax states as well.

Why even bother filing an extension? While the penalty for late payments is a mere 4%, the penalty for not filing an extension at all is 5% per month, up to a maximum of 25% of the amount of tax due. Whoa. An extension is definitely your friend when you really think about it.

Overall, it’s a good time to file an extension, get your thoughts collected, and then square off with the IRS when the tax season fever is long gone and all the refunds are spent. It could be the smartest decision you’ve made all year!