Filing a tax extension gives you an extra six months to file your return, but not to pay your tax bill
The April 15th tax deadline is still over a month away, but for many taxpayers this won’t be long enough to get their financial ducks in a row. Thankfully, the IRS allows you to file an extension and buy yourself a little extra time.
An extension gives you an extra six months to file. Instead of being due on April 15, 2013 your tax return will then be due on October 15, 2013. E-file stays open until the October deadline so you can prepare and file your return just as you would during the season.
In order to request a tax extension you must file Form 4868 [Application for Automatic Extension of Time to File U.S. Individual Income Tax Return] by the normal tax deadline, April 15th.
An extension does not, however, give you an extra six months to pay the tax man. On Form 4868 you must estimate your tax liability and pay any balance due. If this amount is different from what you get after actually filing your taxes later in the year, you will either receive the difference in the form of a refund or have to send an extra check to the IRS.
Basically a tax extension just lets you avoid paying a failure-to-file penalty for six months. This nasty little penalty charges you 5% of your unpaid tax liability for every month your return is late, up to 25% of your total liability.
But even if you file an extension you are still liable for a failure-to-pay penalty and interest if you don’t get the IRS its money by April 15th. The failure-to-pay penalty, while less than the failure-to-file penalty, is nothing to trifle with. It amounts to 0.5% of your tax liability for every month your tax bill goes unpaid. This means it could be quite costly not to pay the IRS by April 15th.
You can file an extension right here on RapidTax. Then you can come back at your leisure over the next six months and take your time preparing your return. Filing an extension is simple. Just create an account to get started.
Photo via 401(K) 2013 on Flickr.
