How to file and extension on your taxes
With only hours left to complete your tax returns, some taxpayers are in a filing frenzy. The IRS says that two out of three taxpayers have already filed. But that still leaves about 50 million tax returns to go.
Not everyone will complete their tax returns by April 15. Though if we follow the 2014 pattern, about 18 million of us will be filing extensions. Thank goodness we can file those electronically. Though some of us miss the annual pre-midnight post office ritual, where our last-minute extension filings were accompanied by the excitement of radio DJs broadcasting from the main USPS branch.
You will use IRS Form 4868 for your personal extension. Some states accept the IRS extension. Some require you to file your own. William Perez, in the About.com Tax Guide, provides links to all the state tax authorities so you can look up your own state easily.
For other extensions, like partnerships, trusts, gift taxes, etc. you will use IRS Form 7004. Most of these forms will not require any payment. It’s too late to file extensions for calendar year corporations or S corporations. Those were due on March 15. But the first quarter estimated tax payment is due on April 15. Those can be paid online, by selecting form 1120-W.
So, how do you file your extension electronically? Let me count the ways. (In all cases, for personal extensions, select Form 4868 for 2014 when you log into any of the electronic systems. For other payments, be sure you select the correct year and form.)
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1) Your tax software of choice will let you file from within their system. Some will do it for free, if you pay for the tax software. Others have a fee for the extension Form 4868.
2) You can use the IRS’s FreeFile system to file your extension form. This is especially good if you owe no money. But be sure to print out the form and proof of filing and acceptance.
3) You can use the IRS’s Direct Pay system.
•Advantage — no fees. You get a printout showing the date and time of the payment for the specified form and year. In other words, you have proof that you filed and paid
on time. Incidentally, even if you don’t owe any money, you can use this to file an extension and just pay $25 or so to get proof of the extension.
•Disadvantage — the money comes directly from your checking or savings account. So you must have enough money in the chosen account when you make your payment. Check to see if your state has a similar program.
4) Pay via credit card. There are three ways to do this.
a) Use the options provided on the IRS website — you have six choices.
i. Advantage — you can probably use the same service to pay your state.
ii. Disadvantage — They charge you a fee, which is listed on the IRS website.
b) You can call up your credit card company and have them make the payment to the IRS and state on your behalf.
i. Advantage — they will take care of all the details for you. And if there is a special promotion encouraging you to pay your taxes by credit card, you might be able to get them to waive the cash advance fee.
ii. Disadvantage — If they make a mistake, you’re in trouble. It takes them a while to process the payment. So calling them at the last minute might mean you file and pay your extension late. And it will take a while to see the record and proof of payment and filing on the statement, even if you log in online.
c) Use the cash advance checks they send you every few weeks.
i. Advantage — Some of them offer 0% interest rates for up to 18 months.
ii. Disadvantage — Watch out for cash advance fees. They can range from 2% to 5% or more. But there may be a special offer with at least one check good for 0% in the same letter. You will need to mail in your extension and payment. So send it via certified mail — and write on the green card: “2014 IRS (or state) Extension Form #”. Photocopy the payment voucher and check for your records.
See, it’s easy to get an extension. And filing for one means no rushing and making mistakes.
You avoid the 5% per month late filing fee. The extensions are automatically approved.
So you don’t need to make up any reasons, like, the dog ate my tax return.
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