- If you're not ready to send in your tax return by April 15, it's time to file for a extension.
- But be sure you understand what that involves and how to go about it.
- Importantly, when you file for the extension you must still pay any taxes due.
- You must also file a separate extension request for your state tax return.
April 15 may be the deadline for paying your taxes, but about 15 million taxpayers won't be filing their returns. Instead, they'll file for an extension. Maybe you should be one of them.
Even if you live in Maine or Massachusetts, which have April 17 deadlines this year, you shouldn't feel pressured to get your tax return prepared and filed by that date. If you need more time to complete your tax return, you should take it. It could be because you're missing information or just want time to double- and triple-check to make sure your claiming everything that you're due.
You don't need to give any reason to delay filing your tax return. Anyone is entitled to request a six-month extension. And filing for one is quick, easy and free.
You just have to file the appropriate form, which is Form 4868, to get automatically granted an additional six months -- until Oct. 15 -- to file your 2018 federal income tax return. According to the IRS, the easiest way to get an extension is to use IRS Free File.
You can also file for an extension by using IRS Direct Pay or the Electronic Federal Tax Payment System. If you use these payment services, you don't have to file a separate Form 4868 because you'll indicate that the payment is for your extension.
It's still time to pay your tax due
That brings up an important point. Filing for an automatic extension doesn't mean you also get an extension to pay any taxes you owe. The IRS requires that you make a reasonable estimate of what you might owe and submit a payment with Form 4868. You can make that estimate by completing your tax return with the information you have on hand and making good-faith estimates where you're missing information.
When you make a tax payment with your extension, be careful not to underpay. If you do, you may be subject to underpayment penalties and additional interest. Generally, you won't pay a penalty for if you've paid (from withholding, estimated tax payments and what you pay with the extension) the smaller of 90 percent of your 2018 tax liability or 100 percent of your 2017 tax liability (110 percent for taxpayers with adjusted gross income exceeding $150,000).
If you want to avoid any additional interest for paying late, you must pay the full amount of the tax liability you owe. The current IRS interest rate for underpayment is 6 percent for individuals.
Also note: When you file for an extension for your federal tax return, you'll also have to do the same for any state income tax returns because the federal extension doesn't apply to your state return. Most states will have the necessary information and forms available on their websites.
Common reasons for getting an extension
Here are a few reasons why filing an extension is a good idea:
- If your tax preparer is really backed up, ask him to file an extension for you. This will give him more time to finish your return later when he can give it his full attention.
- Many financial institutions send a corrected Form 1099 with revised amounts for qualified dividends and foreign taxes. Taxpayers with investment income may want to file an extension if they typically receive a corrected form 1099.
- If you bought or sold a home, changed jobs, started a business, exercised stock options, etc. in 2018, you'll be filing some new forms and may need more time to gather the information you'll need.
- If you own investments or partnerships whose income is reported on a form K-1. Typically, these forms are sent out after March, so you probably haven't received them.
- If you qualify for special tax credits, such as for energy-saving home improvements you made last year and need more time to gather your receipts to calculate the credit you can claim.
Also, if you're overseas and don't plan to return to the U.S. until after April 15, you should file an extension. If you're serving in the military overseas, IRS rules give you an automatic two-month extension -- you don't even need to file for it. But if you still need more time, you must file for extension just as civilians must do.
And if you're serving in the military and deployed in a combat zone, you're allowed an automatic extension equal to 180 days, plus the time spent in a combat zone (and additional time spent hospitalized due to injuries sustained in a combat zone).
If you don't file a tax return or at least an extension, you'll owe IRS penalties and interest. The penalty for not filing your return or an extension is a stiff 5 percent per month up to a maximum of 25 percent of the amount of tax due on the late-filed return.
And don't worry -- filing for an extension doesn't make your return any more likely to be the target of an IRS audit.