With ten days left until Tax Day, taxpayers are already in a panic, compounded by crazy headlines screaming about “last minute” filers and procrastinators. You can tell the folks who write headlines don’t generally work with actual taxpayers: if they did, they’d understand that there’s a good week or so to go before it’s “last minute.” For now, it’s simply called tax season.
That said, if you are looking at the calendar and like me, you don’t anticipate being any closer to filing on time in ten days than you are today, don’t panic. You can join the nearly 10 million taxpayers who are expected to file for an automatic extension this year.
Filing for an extension isn’t terrible. And don’t buy the hype: it isn’t an audit trigger. The IRS understands that there are a number of legitimate reasons why taxpayers may need more time to file. One of the most common reasons for filing an extension is owning or participating in a business. Depending on the nature of your entity, tax returns for the business may not even be prepared until March or April. In particular, if the business is a pass-through entity, that could make it tight to account for the Schedules K-1 from a business return on your personal income tax return by April 15.
There may be other reasons: you could be a beneficiary of a trust or estate or a shareholder or partner in a pass-through entity which means that Schedules K-1 might not have arrived in your mailbox yet. You might not have received your other tax forms on time. You might still be waiting for a 1099-R. You might be funding an IRA (you have until April 15) and need to include that information on your form 1040.
Whatever your reason for not being ready to file is yours. You don’t need to tell anyone why you’re filing for extension – even the IRS – since the extension is granted automatically if you follow the rules.
And again, it doesn’t increase your risk of audit or examination. It’s always better to file a complete, correct return on an extension than a rushed, flawed return by April 15.
You have a lot of options for requesting an extension, ranging from doing it yourself to having someone do it for you. To file for an extension, you can:
- File for an extension online for free using FreeFile on IRS.gov (check the list for those that say “Free Extensions” – as of this writing, there are 8 that offer extensions for free)
- Ask your tax preparer to file for an extension for you
- Use a service like File Later to file for an extension for you
- File using tax prep software like TurboTax, TaxAct, or H&RBlock
- File for an extension using federal form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return (downloads as a pdf).
The regular “timely filing” rules apply – so be sure and get your extension postmarked or e-file accepted by the end of the day on April 15. Assuming you get your request in on time, you will have six more months to get your return to the IRS and not be subject to the late-filing penalty, which is normally 5% of your unpaid balance per month. For 2014, this means that, with an extension, you’ll have until October 15, 2014, to file a return.
To file an extension, you’ll need:
- Your name (and spouse’s name if you’re filing jointly) and address
- Your Social Security number (and spouse’s Social Security number if you’re filing jointly)
- An estimate of total tax liability for 2013
- Total of what you have already paid in 2013 (including withholding and estimated payments)
- The amount you’re paying with the extension (if anything).
Remember that an extension is an extension of the time to file and not an extension of time to pay. If you expect to owe at tax time and you’re filing for an extension, you should make a payment with your extension request in order to avoid interest and penalty later. The interest rate is currently 3% per year, compounded daily, and the late-payment penalty is normally 0.5% per month.
In some circumstances, taxpayers get an extension of time to file without having to ask. For 2014, that includes:
- If you’re a US citizen or resident and you live outside of the U.S. or Puerto Rico and your main place of business or post of duty is outside of the US or Puerto Rico or if you are active-duty military and live outside of the U.S., you qualify for a 2-month extension without having to file form 4868. That moves your due date to June 16 (since June 15 falls on a Sunday) to file and pay. However, interest is still due on any tax payment made after April 15.
- Members of the military and others serving in Afghanistan or other combat zone localities generally have until at least 180 days after they leave the combat zone to file returns and pay any taxes due.
- People affected by certain tornadoes, severe storms, floods, and other recent natural disasters have extra time. Currently, victims of last month’s mudslides and flooding in Washington state will have until October 15 to file their returns and pay any taxes due.
Whatever you do, don’t panic. While it’s always a relief to have your tax return over and done with by April 15, it’s not the end of the world if that doesn’t happen. File for an extension. And then breathe.
