Tax deferral occurs. But if you’re still missing important forms or feeling overwhelmed, you can buy more time by filing a free tax extension.
According to a recent survey by IPX 1031, nearly a third of Americans are procrastinating with their taxes, with the top reasons being complexity and stress.
You can avoid a late payment penalty by extending the deadline until the nationwide deadline of April 18. However, you must pay your remaining balance by the due date to avoid late payment penalties and interest. Depending on where you live, you may also need a separate state income tax extension.
More from Smart Tax Planning:
Here’s a look at more tax planning news.
If you apply for an extension, you have an additional six months to file your taxes, which extends the deadline to October 16. “It only helps you,” said Bill Smith, national director for technical tax services at CBIZ MHM National Treasury.
However, late filing means you have to wait longer for a refund, he said. As of March 17, the average refund, according to the IRS, was $2,933.
While several disaster areas are qualifying for automatically extended deadlines this season, Karla Dennis, an enrolled agent and founder of Karla Dennis and Associates, suggests affected taxpayers also request an extension through April 18.
“It was the same in 2020 when we went through Covid,” she said. “Unfortunately, the IRS has not upgraded its system and many taxpayers have still received letters.”
How to file a federal tax extension
If you can’t make the April 18 tax deadline, there are a few ways to apply for a federal extension with or without a tax professional.
One option is to file Form 4868 online through IRS Free File, which offers free guided tax preparation software. “Anyone can go to this page and request the extension,” regardless of income, said certified financial planner and enrolled agent John Loyd, owner of The Wealth Planner in Fort Worth, Texas.
Another option is to make an electronic payment and select “renewal” as the reason, which the IRS says allows for an automatic six-month extension without filing a 4868 form.
However, Loyd uses the first option to minimize the chance of error or confusion. “When you submit Form 4868, it’s very clear that you know exactly what you’re doing,” he added.
Dennis also suggests submitting Form 4868 through the payment option, especially if customers later need proof that they’ve submitted an extension. “I’ve never been able to defend a late-filed return with someone who said they went online to pay,” she said.
Again, you’ll need to take separate steps based on where you live to request more time to file your state tax returns.
Comments are closed.