Even though the eggnog is still warm, the truth is that April 15 will be here before we know it, and many of us won’t be ready to file taxes in just a few short months. Thankfully, the IRS allows extensions — but even those take time. We checked in with experts to find out what do to if you need an extension, and how to file.
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Is it possible for anyone to get an extension? Even me?
It’s true — anyone can get an extension.
“You can get an automatic six-month extension to file your federal income tax return by filing a Form 4868 by the due date for the tax return, April 15, 2013,” says Mark Luscombe, principal analyst at CCH, a Wolters Kluwer business.
However, Luscombe cautions, “this is an extension to file the return, not an extension to pay the taxes due.” The Form 4868 should include a payment of any taxes due to avoid interest and penalties accumulating until the return is filed.
What are my first steps?
“If you are already feeling like you may need an extension to file or could have difficulty paying the amount owed in April, it's best to act early,” says Niall Wells, CFO of Planwise, an online budgeting tool. “Prepare yourself mentally by taking some time to understand your situation, seek the advice of a professional or contact the IRS.”
Is it a good idea to file an extension, or should you just go ahead and file normally if you can?
“Extensions serve the purpose to allow taxpayers to gather all their information so they can timely file a complete and accurate return without being assessed a late filing penalty,” says Ron Michelson, a CPA with Fiske & Co.
“Some people use the extension to procrastinate and would just rather not file their return until the extended due date in October. The most important point is to make sure that the taxpayer needs to estimate the tax they owe as best as they can, to avoid waiting until October and then getting hit with late filing penalties going back to April.”
What if I’m in the military or working overseas and there’s no way I can file?
“Special rules apply for those that are outside of the U.S. or serving in a combat zone,” says Wells. “It is important to note that even if your extension for filing is granted, this does not extend your time to pay any amounts owing and you may still incur interest and penalties if you do not remit the amounts payable by the April deadline."
Plan accordingly, Wells cautions, as interest and penalties can be “hefty.”
“Thankfully, there are options to pay by installment, though this may still accrue interest and penalties,” he says.
Who most commonly requests an extension?
Usually, individuals filing for an extension are those who have complicated returns and do not have all their information ready by April 15, says Michelson.
“For example, quite often taxpayers who have invested in partnerships or S corporations do not receive their K-1s from these entities until after the original April 15 due date. These entities returns are not due until Sept. 15, with extensions,” he says.
Okay. I’m ready. What are my first steps in requesting an extension?
The first step in requesting an extension is to estimate your tax for the year based on the information that you have at the time of the extension, Michelson says.
“If the IRS determines you made no attempt to estimate your tax for the extension, the extension could be disallowed which could result in late filing penalties,” he cautions.
How long is an extension good for?
The extension is good for six months, extending the due date from April 15 to Oct. 15.
If I get an extension, am I subject to increased interest payments or late payments?
“When you make an extension you are extending the filing due date of the return,” says Michelson. “Although you are not required to make a payment of the taxes you estimate are due, Form 4868 does not extend the time to pay taxes.”
If you do not pay the taxes that you owe, in general interest and penalties will be charged on any underpayment, he adds.