Tax Day is fast approaching. Like many U.S. households, you might be scrambling to meet the deadline. Whether you're still gathering tax documents or waiting to file until you've saved enough to cover your tax bill, read on to discover if filing an IRS tax extension might benefit your situation.
What is a tax filing extension?
An IRS tax extension gives you an extra six months to file your U.S. federal income tax return. For example, if Tax Day falls on April 18, you'll have until October 18 to file your return. While the extension provides extra time to file your return, it does not give you extra time to pay without incurring a late payment penalty. Nor does it change your tax liability. However, it can help you avoid a failure-to-file penalty which is at least 5% of the unpaid taxes for each month the return is late.
To request an extension, IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return must be submitted by the original date the return is due.
Tax Filing Extension Benefits
There are numerous benefits to filing an extension.
It's Free – There is no cost to submit IRS Form 4868.
It's Automatic – As stated in the application title, approval is automatic. There's no need to provide a written explanation and wait for approval of the extension. However, you must double-check the information entered on the form. Confirm that your name, address, and Social Security number are correct before filing the form. Errors could result in your application being rejected. NOTE: You must enter a tax liability estimate on the form.
It Helps with Accuracy – You might be better off waiting on W-2s, 1099-NECs, or other tax documents from third parties instead of estimating income, interest, or additional tax-related information. If you provide incorrect information, it could cost you time and money to file corrections at a later date.
It Could Save You Money – The extra time could help ensure you accurately calculate your itemized deductions. If you're unsure whether you should take a standard or itemized deduction, thoroughly reviewing the available deductions for individuals could ensure you don't miss out on potential tax savings.
How to Request a Tax Filing Extension
You can submit IRS Form 4868 to file a tax extension by:
- Completing the paper form and dropping it in the mail by the tax filing deadline. It must be postmarked by the deadline or it will not be accepted.
- Working with a tax professional to file the form on your behalf.
- Electronically filing the form yourself using the IRS Free File system.
- Using tax software. You'll need to follow the instructions provided with the service.
If you wish to confirm the receipt of your extension application, contact IRS customer service at 800.829.1040.
Are there other options worth considering?
If you believe that you owe taxes and won't be able to pay them by the due date, the extension can help you avoid a failure-to-file penalty, but it won't shield you from late payment penalties which are 0.5% of the unpaid taxes, charged monthly. However, if you qualify for an IRS Payment Plan, you could avoid being charged for failing to pay taxes owed by the due date. Remember that payment plans are subject to interest charges.
Another option involves applying for a SAFE Personal Loan and using proceeds to cover the taxes owed. Depending on your situation, it might be less expensive than the total penalties and interest you may owe to the IRS.
There's no question that filing an extension gives you extra time to gather documentation and prepare tax forms. While it won't change the amount you owe, an extension could provide you with peace of mind knowing that you're filing the most accurate return possible.
DISCLAIMER: SAFE FEDERAL CREDIT UNION DOES NOT OFFER PROFESSIONAL TAX SERVICES. THIS INFORMATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. TAX LAW IS SUBJECT TO CHANGE. INDIVIDUALS SHOULD CONSULT WITH A QUALIFIED TAX PROFESSIONAL FOR OFFICIAL TAX ADVICE.