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  • Writer's pictureBrian R. Schobel, CPA

Understanding Tax Extensions: When and How to File One


Filing a tax extension can sometimes be the difference between doing your taxes right and rushing through them with potential mistakes. But what does getting an extension entail, and how can you do it correctly to avoid penalties? Let's break down the essentials.


Why You Might Need a Tax Extension


  1. More Time to Gather Documents: If you're waiting on essential documentation or have complex financial situations to sort through, an extension gives you extra time.

  2. Unexpected Life Events: Life can be unpredictable. Illness, family emergencies, or natural disasters can disrupt your ability to file on time.

  3. Avoiding Mistakes: Rushing to meet the deadline can lead to errors. An extension allows you to double-check your return for accuracy.


Impact on Tax Obligations


It's crucial to understand that an extension to file is not an extension to pay. If you owe taxes, you're still expected to estimate and pay what you owe by the original due date, typically April 15. Failure to do so can result in penalties and interest on the unpaid amount.


How to File for an Extension


  1. Estimate Your Tax Liability: Use your previous year's return or current year's information to estimate if you owe taxes.

  2. Submit Form 4868: You can file this form electronically through tax software, hire a tax professional to file it for you, or mail it to the IRS. Filing Form 4868 gives you until October 15 to file your tax return.

  3. Pay Any Estimated Taxes Owed: To avoid penalties and interest, pay your estimated tax liability by the original due date. You can do this online, by phone, or by mail.


Deadline for Filing Without Penalties


To avoid late-filing penalties, you must file Form 4868 by the original tax filing deadline (April 15). Remember, this extension grants extra time for filing your return, not for paying any taxes you owe. The IRS will still charge interest on unpaid taxes starting from the original due date.


Conclusion

Filing a tax extension can be a strategic move to ensure you're submitting your most accurate return without the rush. However, the key to effectively using an extension is understanding its limitations, especially regarding tax payments. If you're unsure about your tax situation or how to proceed with an extension, consulting a tax professional can provide clarity and direction, ensuring you meet your obligations without incurring unnecessary penalties.


Taking the time to manage your tax obligations carefully can save you from headaches down the line and keep you in good standing with the IRS.


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