A tax extension provides annual filers the ability to push back their tax deadline by six months from April 15 to October 15. The additional time can help you avoid scrambling to complete your filings with incomplete documents or making a mistake. While this may seem like a simple solution to the impending deadline, there are several factors you need to consider before choosing a tax extension.
What is a tax extension?
A tax extension is a request filed with the Internal Revenue Service (IRS) to allow you to file your return at a later date. The traditional tax extension gives filers an additional six months to complete their returns. It’s important to note, though, tax extensions give you an extension on filing your return — not on paying your taxes. Even if you file for an extension, you need to make an estimated tax payment by April 15 to avoid any potential taxes or fees.
When to get a tax extension
If you’re interested in filing for a tax extension, the deadline is April 15. Failure to file a return or an extension by this date will open you up to the potential for late payment penalties. Filing an extension only takes a few minutes, and there are several online products to help streamline the process for those that don’t like using IRS forms. If you miss the April 15 deadline to file an extension, the IRS will not accept a late request. At that point, you will want to complete your return as soon as possible to minimize the late payment penalties.
Determining whether or not you should file a tax extension depends on your current situation. If you don’t have all the necessary documents, physically do not have the time to file or have some other reason inhibiting completing your return, then you may want to request an extension. Keep in mind this only affects the paperwork portion of your return. You are still required to pay the monetary part of your return on time.
“If you have all the documents you need to prepare an accurate return, there’s no reason to wait to file,” says Nathan Rigney, the lead tax analyst at The Tax Institute at H&R Block. “If you’re due a refund, there’s no benefit in waiting to get your money. And if you’re worried you’ll owe, you don’t have to pay when you file, just by the deadline.”
However, Rigney adds that if you have any questions about filing a tax extension, it’s beneficial to consult with a tax professional about tax extensions and filing a return.
Types of tax extensions
When it comes to tax extensions in the U.S., there are three different scenarios or types of tax extensions to be aware of.
- General tax extension with Form 4868: This extension gives anyone requesting it the ability to wait up to six months (until October 15) to file their return.
- Living outside of the United States: For those that are U.S. citizens or resident aliens and are not in the U.S. on April 15, you qualify for an automatic two-month extension requiring no formal request. This does not count being out of the country on vacation or for the day. You need to be living abroad and have your main business or post of duty also located outside of the U.S. or Puerto Rico. This extends your filing date to June 15. While you’ll receive this extension automatically, you will need to attach a letter to your filing explaining the reasons you qualify for the extension to avoid penalties.
- Combat zone service: Members of the armed forces on deployment or in a combat zone get an automatic 180-day filing extension. The 180-day countdown starts either on the last day you’re deployed/in a combat zone or the last day you are in a hospital from any service-related injury from your deployment, whichever is later. For example, if you are deployed until May 25, your 180 extension begins on May 25.
How to file for a tax extension
Filing tax extensions is a simple process that only takes a few minutes. The standard way to file for an extension is to head over to the IRS’ website and fill out form 4868. Attached to the form are instructions for filling. Those in a time crunch or who want to simplify the process can utilize one of many online tax products that will file the extension on your behalf. While these are easier to use, they usually carry a small convenience fee. Filing directly with the IRS does not cost anything.
Pros of filing a tax extension
- More time to collect documents and file an accurate return
- Reduction in late penalties
- Can give self-employed workers more time to fund retirement plans
Cons of filing a tax extension
- If you owe money, you’ll accrue interest charges
- Delay in getting your refund if owed one
- You still have to estimate and pay your taxes by the original filing date
The bottom line
Tax extensions are not designed to promote procrastination. They were introduced by the IRS to give filers with legitimate reasons for needing more time to avoid penalties. Whether you file now or request an extension, you’ll still end up owing the same amount on your taxes or get the same return. If you’ve got all your documents and are able to file by April 15, take the time to get your taxes completed. But if you do need the additional time, make sure you file for an extension by the deadline and you’ll have an additional six months.