What to Do if You Can't Finish Your Taxes by April 15
Source: The Motley Fool.
April 15, the deadline for filing your tax return, is fast approaching. Although the deadline may seem set in stone, it's possible to get an extension for filing your individual tax return. The IRS will grant an extension in most any circumstance so long as you file the correct paperwork by April 15.
Getting an extension is fairly simple, but it does have a few rules.
Do the paperwork
The IRS grants a six-month extension to the filing deadline to people who submit Form 4868 (link opens PDF) by April 15. The form is called "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return," and you can find it online. The new deadline for people who file for an extension is Oct. 15. Obtaining an extension is a painless process; you do not have to provide a reason for the extension, as it is granted automatically. The IRS will not contact you if your extension is accepted; you will only hear from the IRS if the extension is denied.
When you eventually file your taxes, you do not need to attach a copy of Form 4868 to your tax return; your return and the extension request are filed separately. However, if you submitted a payment toward your tax bill with your extension request, you do need to report that on your taxes. Form 4868 (linked above) tells you on which line to report your payment. For example, if you file your taxes using Form 1040, report your extension payment in line 68.
If you do not submit paperwork on time, the IRS charges a "late filing penalty." The penalty is only charged if you file your taxes after the due date (or, if you file for an extension, after the new, extended deadline). The IRS typically levies 5% of the amount due for each
month that your return is late, with a maximum charge of 25%. A return submitted more than 60 days after the deadline will have a minimum penalty of $135 or the balance of the tax due on your return -- whichever is smaller.
Make a payment
When requesting an extension, you need to know that you are only getting an extension for filing your tax return, not for paying taxes you owe. It is important to accurately estimate your tax burden and submit a payment (if necessary) by April 15 so that you do not have to pay interest or late fees on top of your taxes.
If your tax payment is late, then there are, of course, late fees. This is a separate penalty from the late filing charge. Failure to pay taxes by April 15 results in a penalty of 0.5% of any tax not paid, and the penalty is applied for each month after the deadline. Even if you have completed the appropriate extension paperwork by April 15, the IRS can still charge a penalty for taxes not received by then. If you are able to demonstrate a reasonable cause for not paying your return on time, the IRS may waive this fee. Attach an explanation to your tax return. Do not include an explanation with Form 4868.
If you live outside the U.S. or are serving in a combat zone, there are special rules for receiving an extension. Taxpayers who live outside of the United States automatically get two extra months to file returns and pay any taxes owed without filing Form 4868. Members of the military who are deployed outside of the United States receive an automatic six-month extension for filing their taxes. You can learn more about the deadlines for those serving in the Armed Forces here .
Take advantage of this little-known government tax ruleSource: www.fool.com