Need a Tax Extension?

Need to file a tax extension? If you are running outof time to file your tax return, this could be an option for you.

The Internal Revenue Service knows that sometimes people cannot meet the April 15 deadline. They allow people to apply for a six month extension to file their tax return by filing Form 4868 "Application for Automatic Extension of Time to File U.S. Individual Tax Return" on or before April 15.

For example, this means that if your 2010 individual tax return is due April 15, 2011, filing Form 4868 will give you until October 15, 2011 to file your return. You can pick up Form 4868 at your local IRS office, or sometimes even at the post office or library. If you have the free Adobe Acrobat Reader installed on your computer, you can also download Form 4868 in a PDF file. If you don't have Adobe Acrobat, you can download it for free here.

You can e-file your tax extension by using your computer or over the telephone; or you can file by mail. If you choose to e-file using your computer, see instructions in your tax software. Many people find that the easiest way to file is by mail. It is always good idea to file via certified mail, with "return receipt requested." It costs a few dollars extra, and usually involves standing in line at the post office, but it gives you the added peace of mind knowing that you can prove to the IRS that your tax extension was filed timely.

When you print out your tax extension application form, you'll see that it is quite easy to fill out. However, there are a few things you need to keep in in mind, if you wish to do it right.

First, you should know that Form 4868 is an "Extension of time to file", and not an "extension of time to pay." Put simply, the IRS wants it's money no later than April 15. This means that you should at least have an estimate of what you'll owe and enter it on line 6 of Form 4868.

A lot of people just enter $0 on line 6 because they do not know what their tax liability is. The IRS will accept the tax extension, but you should know that if you end up owing a lot of taxes when your return is filed, the IRS could technically deem your extension invalid, which would subject you to late filing penalties of 5% for each month (or part of a month) that your tax return is late (up to a maximum of 5 months = 25%). So you can see that if you think you are going to owe money on your tax return, it is wise to at least enter an estimate on your tax extension and pay it by April 15. I have not actually seen it happen to anybody, but it could. In any case, it is always better to file a tax extension (with or without a payment) than to file no tax extension. If you don't file any tax extension, you are almost guaranteed that late filing penalties will be assessed.

Second, a lot of people fail to file their tax extension because they don't have the cash to pay the tax that they think they'll end up owing.

Generally speaking, it is not a good idea not to file a tax extension just because you don't have the money to pay your tax bill. If this is your situation, consider filing the tax extension form and try to at least pay something. There will still be late payment penalties, but you might be able to avoid the ugly late filing penalties referred to earlier.

So, you see, even a simple tax form such as the Form 4868 is not that straightforward after all. But if you cannot get your return in by the April 15 deadline, filing a tax extension can at least reduce the damage to your wallet. I hope you have found this information helpful!