Today is April 15th. If you haven’t completed your tax filing or filed for an extension yet, now is the time. Contrary to popular belief, filing an extension does not increase your risk for audit. In fact, it’s so common that the form doesn’t even require a signature! Regularly-cited reasons for needing to file an extension include:
- Changes to your situation have made your taxes more complicated, such as getting married, purchasing or renting a home, or starting a business.
- You are expecting a delayed K-1 from an investment, a business, an estate, or a trust. (Or you are expecting an amended K-1).
- You want to make a contribution to a SEP-IRA later in the year. By filing for an extension, contributions can be made as late as October 15th.
- You’re missing a W-2 or a 1099.
- You haven’t made the time to file your return.
Filing an extension is incredibly easy and requires the submission of only one form, Form 4868. Many tax software providers make it possible to file for an extension online, or a tax professional can file on your behalf. Alternatively, you can file Form 4868 yourself and drop it in the mail. April 15th is the deadline to get the extension filed. If filed on time, the taxpayer receives an automatic 6-month extension, which prolongs the filing deadline to October 15.
An important note: an extension to file is not an extension to pay. Filing for an extension saves you on the big failure-to-file penalty (5% per month), but there is still a penalty of ½% per month on the amount of tax due that has not been paid. If you think you’ll owe, you should send an estimated payment along with your Form 4868. The balance will get reconciled when you file your official return. An estimated payment may be made through your filing software, by printing a voucher to mail in a check, or by visiting IRS Direct Pay to make a payment.
What about state taxes? Many states don’t require additional filing and the extension is granted by filing for a federal extension. In Colorado, the extension is automatic and doesn’t need to be filed. Make sure to check your state’s rules on how extensions are handled and how to send in an estimated payment.
The entire process should only take a few minutes and shouldn’t cost anything if you do it yourself. Now is the time to stop stressing about taxes and get an extension filed!