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Should I File An Extension?

The deadline for filing taxes is quickly approaching. There are many reasons people miss the deadline for filing taxes and the IRS, in most cases, understands this; it’s why they have the Form 4868 available. If a person is unable to complete their taxes by April 15 then they can request a six month extension that will be granted automatically by the IRS. A taxpayer does not need to give the IRS a reason for their extension request and will have until October 15 to file their taxes. However, there are a few things that a taxpayer should know prior to making an extension request.

Penalties for Filing an Extension

First and foremost, filing an extension does not mean you have more time to “pay” your taxes. You still need to pay what you owe by April 15th, it only means you have more time to ensure accuracy and ideally limit the amount of penalties you’ll incur.

With that in mind, there are penalties for filing an extension. In some cases, the penalty for an extension can be greater than the penalties involved with not paying the full amount of taxes due on April 15. If a taxpayer is granted an extension, then they will need to pay the amount they owe by the April 15 deadline in addition to interest on the amount, and there is an additional late fee that is added as well.

How to File an Extension

A taxpayer can use IRS free file to make an extension request electronically. However, it is important to note that the request on IRS Free File must be made by midnight on April 15. For users who do not want to make an extension request electronically or are unable to a request can be made by mailing a Form 4868 to the IRS offices. Form 4868 is available on the website of the IRS and, like an IRS Free File electronic request, must also be submitted by April 15. Taxpayers that will be paying their taxes using one of the many electronic payment options offered by the IRS do not need to submit a Form 4868.

Automatic Extensions

There are various taxpayers who receive automatic extensions on their tax due dates without having to complete a request. Taxpayers on military duty are among a few of the taxpayers who are granted an automatic extension. For taxpayers who believe that they may be eligible for an extension without a request it will be best to search for the list of candidates on the IRS website or contact the IRS directly.

Paying the Fees

There are several ways that taxpayers can pay the fees that are involved after requesting an extension past the April 15 due date. You can request extensions through IRS Free File, where you can set up electronic funds withdrawal from a bank account. The bank account that a taxpayer uses for their electronic withdrawal can either be a checking account of a savings account. To set a bank account up for an electronic withdrawal a taxpayer will need to provide the IRS with both the account number and the routing number of the bank account.

Prior to requesting an extension, you should assess if it will be the best option for you. The IRS is willing to work with taxpayers who are having difficulties filing and paying their taxes. They provide various payment options and payment plans to ease the burden on taxpayers. If a taxpayer is undergoing a financial hardship the IRS has several ways in which they work with them. Contact a local CPA to help you through this process.

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.