Oh no! Taxes are due and there’s no time to complete them! My deductions aren’t ready and I don’t even all the receipts I need in anything resembling an order! What am I supposed to do?
If you found yourself saying these very things with the tax deadline approaching, it may be time to file for a tax extension. Yes, they exist, and work surprisingly well. All you have to do is file one simple form and voila, you have a lot of extra time to get everything ready!
But is it really that easy? Does filing a tax extension come with unforeseen consequences? Let’s take a look.
Presumably after reading the opening you probably just want to know how to file for an extension, so we’ll cut to the chase. The form you want is Form 4868. It’s an astonishingly simple form for one with such power, and only takes a few minutes to fill out. You can also file your tax extensions using online services like Turbotax Easy Extension. Though those services do charge you a small fee, they can save you the effort of finding and mailing the 4868 form. No matter how you file, you can buy yourself a six-month extension on the time you need to pay your taxes.
But there’s one major caveat you must remember when filing a tax extension. As you fill the form out, you’ll notice the information you provide is pretty basic: name, address, etc. However, the second part of the form asks you how much you owe.
Wait, what? How are you supposed to know how much you owe if you haven’t filled out your forms yet? The whole point of this was that I didn’t have time to file!
The problem is the tax extension covers your actual tax filing and nothing else. So when you send Form 4868 into the IRS, you must also submit a payment toward it by the tax deadline – this year that’s April 17th. However, you don’t have to have an exact amount. You just have to figure out how much you estimate you owe. (Outright.com can help… sign up for a free account and estimate how much you owe in taxes today!) When you do file, you will either pay the remainder of the amount you owe or receive a refund.
What To Do After
Now that you’ve sent in the paperwork to push back your due date (and a check how much money you owe, right?), what do you do now?
You’ve been granted a six month pass on your taxes, so use it wisely. Get as organized as humanly possible. Find all those missing receipts and count up every last penny you think you can deduct on your taxes.
Don’t waste this time as it’ll be over before you know it. You want that estimated payment to be either on the money or too much so you get some in return and avoid penalties. Plus, the IRS doesn’t exactly hand out free passes all the time, so when they throw you a bone, milk it for all its worth!
Getting organized during this time can also help you in the long run. After all, you’ve probably always wanted to get your business into tip-top shape, so now’s the opportunity! Get all that paperwork into order and keep it there. Then come next year there won’t be a need to file for an extension.
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