While I hate to be the bearer of bad news, Tax Day is just around the corner. The Tax Deadline for your 2018 tax filing is April 15th, 2019.
However, if you find yourself unable or unwilling to get your taxes done by that deadline you can request a six-month extension to file. In case you were wondering the deadline to apply for tax extension also falls on April 15th. The good news here is the applying for a tax extension could be one of the easiest parts of the tax filing process.
There is no shame in filing for a tax extension. I’m guessing some of you procrastinate and will wait until the night before or day of, to file regardless of anything else. That being said, I work with many clients who own businesses and have more complicated tax situations. Even when everything is organized and give to their tax experts early- they still often end filing on an extension.
The reality is, the more complex your taxes are likely to be, the more likely you are to need a tax extension. Often times you are still waiting on tax forms like k-1. For those who own businesses or are self-employed, you may be filing tax returns for your business as well as yourself as an individual. The good news is this also brings with it many more opportunities for proactive tax planning. Not to mention tax-saving retirement plans like Solo 401(k)s or even Cash Balance Pension Plans.
What does a Tax Extension Mean?
It is important to note here that an extension only applies to an additional time frame to file your taxes. You will still need to pay any taxes owed to the government by April 15th. If you are unable to pay your taxes in full, the IRS may be willing to offer a payment plan.
You can potentially also pay with a credit card. We go further into when it this a good idea in this post, also for Forbes.com. As a financial planner, if you don’t have the money to pay now, using a credit card to pay your taxes will likely not be a good idea.
Here is How You Can Easily File For a Tax Extension.
You simply head over to the IRS website and fill out IRS for 4868. You can access this form directly at this link. You can do this filing yourself, and it is free. If you are working with a paid tax preparer or CPA they will likely take care of this for you, but make sure to confirm it has been filed. Form 4868 will only apply to your federal tax extension. Many states will also require you to file for an extension directly with them. I won’t be listing the requirement of each state, so take a second and check with your state tax authority to see what form they need to file an extension if any.
For all the do it yourself tax preparers out there, tax software like Turbo Tax should have an option to file for an extension within their tax filing software. If you in the middle of filing with them, this may be an easier way to file for a tax extension. If not, you can simply use the IRS form listed above.
You will have to answer a few short questions to file for an extension. The big ones are Estimated taxes owed. As well as the approximate amount of taxes paid already. Beyond that, receiving a tax extension is basically an automatic process. You will not be required to provide an excuse to file late. Assuming you fill in the form completely and properly your tax extension filing will be granted. With a tax extension, you will have an extra six months to file. Meaning your new tax deadline will be October 15th, 2019 to file your 2018 taxes. Please, pretty please don’t procrastinate until October 14th to being filing. The later you file the more likely you are to make costly tax mistakes.
What Happens When You Don’t File For a Tax Extension?
The IRS likes to pile on penalties and interest to taxpayers who don’t meet their deadlines. The late filing penalty is 5% per month on any unpaid taxes. This caps out at 25% of unpaid taxes. For those who do file on time, but just say forget to pay on time, you will get slapped with a failure to pay a penalty of 0.5% of unpaid taxes per month. This will continue until you are up to date. Try to avoid these penalties – they are just a big waste of money.
A Few More Last-Minute Tax Tips
This past week I had the pleasure of sharing a few more last-minute tax filing tips with Good Day LA, airing on Fox 11 KTTV Los Angeles. Check out the clip with anchors Tony McEwing and Araskya Karapetyan. Final Reminder, Tax Day is Monday, April 15th, 2019.