How to Get a Tax Extension
The tax-filing deadline is a less than two weeks away, meaning there isn’t much time left for most to file. However, those who can’t file by April 15 are in luck — there is a way to put off filing your taxes. A tax extension is a common form filed when people need a little more time to get their information together.
Even if you know that you’ll need a tax extension, few know the specifics for requesting one. Here are the rules you’ll need to know and follow to correctly submit your tax extension request.
Qualifying for an Automatic Tax Extension
If you can’t file your tax return by the due date, you’re probably eligible for an automatic six-month extension. The only real exception is for people who are under court order to pay by the regular due date. To get your automatic extension, you need to file Form 4868.
Three groups of people get a little more leeway than the rest of us:
- American citizens living outside of the United States and Puerto Rico.
- American citizens traveling outside of the United States and Puerto Rico.
- American servicemen, servicewomen and civilians serving in a combat zone or a qualified hazardous duty area.
Filing a Tax Extension Form
You have to file the form by the standard tax deadline, which is April 15, 2015. The groups mentioned above get an automatic two-month extension to file a return and pay any tax due.
Six months is, generally speaking, the longest amount of time allowed for an extension, though certain exemptions to this general rule exist for people living outside
of the United States, for example. Those who have longer extensions can take that extra time but must ensure their returns are in before their extensions expire.
Form 4868 can be mailed to the IRS or filed electronically by using an IRS e-file form.
Penalties for Late Filing
Even if you file an extension, you will have to pay penalties for filing and paying late. All an extension does is keep you square with the IRS. The penalty for paying late is 5 percent for every month that the outstanding tax is not paid. The maximum penalty for paying late is 25 percent of the total.
You can avoid this penalty if you can show the IRS that you have a reasonable cause for not paying your taxes on time. If you believe that you have reasonable cause, attach a form explaining your reasons to your extension form.
Additionally, you might have to pay interest on unpaid taxes — currently, this rate is about 3 percent annually.
The IRS levies a minimum penalty of $135 or 100 percent of the balance due, whichever is smaller. Much like the late payment penalty, you can avoid this by showing the IRS that you have a reasonable cause for filing after the due date. Attach a statement to your form with an explanation about why you filed after the due date to apply for this extension. You do not have to, nor should you, include the tax extension form.
The interest on your late taxes will accumulate as tax debt until you pay the IRS in full. So although an extension might sound good, it’s wise to only file if absolutely necessary.Source: www.gobankingrates.com