Your tax return isn't due April 18

You’ve been hearing plenty of people claim that April 18 is the last day you can file your tax returns without being late. But that’s not true.

That day is actually Oct. 16.

If you want to file by that later date, you’ll have to notify the IRS by filing a request for a filing extension using Form 4868. But you do have only until April 18 to file a 4868. Doing so on time means you’ll have an additional six months to file your federal return. Filing for a federal extension doesn’t automatically extend state tax filing deadlines, so you’ll also have to ask for a state extension as well.

Filing an extension is free. You can file by logging onto the IRS Free File service, and most states also have this feature available on their websites.

If you’re among the millions who still haven’t submitted a return by now, it’s better to file for an extension instead of rushing to get it done by April 18. Here are a few reasons why:

  • A return filed in a rush now is likely to include errors or be missing some information. For many taxpayers, it’s better to file an extension, especially if you need more time to do a thorough job preparing your tax return.
  • If you need extra time to gather information, such as a missing 1099 for nonemployee compensation you earned last year.
  • If your brokerage firm typically sends corrected 1099s that include revised amounts for dividends, interest, foreign taxes paid and proceeds from investment sales. In that case, you’ll need some extra time to review the corrected form 1099 before entering it on your return.
  • If you own a business or have invested in one (such as a partnership or S corporation). You typically don’t receive the K-1, which reports your income from these activities, until after April, so you’ll need more time to prepare a complete tax return.
  • If you have your return prepared by a tax professional and it hasn’t been completed by now, do yourself and your preparer a favor and ask him or her to file an application for an automatic extension. Your tax pro is swamped right now and will surely appreciate having more time to finish and review your return when things are less hectic and stressful.  
  • If you’re overseas and don’t plan to return to the U.S. until after April, you’re best served to file an extension. And if you’re in the military overseas, IRS rules give you an automatic two-month extension that you don’t even need to file for. If you still need more time, then you must file an application for extension just as civilians must do. 
  • And if you’re a military member deployed in a combat zone, you’re allowed an automatic extension equal to 180 days, plus the time spent in the combat zone and additional time spent if hospitalized due to injuries sustained in a combat zone.
  • If you’ve bought or sold a home, changed jobs, started a business and exercised stock options, among other things, you may need more time to gather the information you’ll need to file.
  • Finally, if you just want to procrastinate. You don’t need a reason to file for an extension. When you do, you’re automatically granted an additional six months to file, no questions asked.

Note, however: Filing an extension gives you more time to file, but it doesn’t give you more time to pay any taxes you owe. You must fork over any 2016 tax you owe when you file the application for extension. If you don’t, the IRS can charge you additional late fees, penalties and interest on the unpaid amount. 

To avoid these, you’ll need to estimate the 2016 tax you owe and submit a payment with the Form 4868. And you must pay (from withholding, estimated payments and what you pay with the extension) at least 90 percent of what you owe for 2016, or pay an amount equal to 100 percent of your 2015 tax liability (110 percent for taxpayers with prior-year adjusted gross income greater than $150,000).

Finally, don’t worry that filing for an extension makes your return a target for an IRS audit -- it doesn’t. But remember, the general rule for audits is up to three years after the date of filing. If you wait an additional six months to file your return, the IRS has an additional six months to audit it.  

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.