What is an Extension and how do you use it?

Deadlines! Most people are not fans of deadlines, especially when it comes to factors that are beyond your control due to which you cannot meet those deadlines. And just like most things, even filing your income tax return has a deadline date. And that date is April 15th of each year. This is the date by which your income taxes have to be filed with the IRS if you don’t want to incur interest and late payment penalties. What happens if you are unable to file your income taxes due to outside factors? Say for example if you are still waiting for a K-1 form from a partnership you invested in or you are waiting on an amended 1099 from you bank. What do you do then? This is when you need to know about “Extensions”

Yes, you read that correctly. There is such a thing called “Extensions” and it is available for anyone to extend the due date of your tax return. IRS has made 2 forms of extensions available for the taxpayer. One is the Form 4868, which is an automatic four-month extension and the other is the Form 2688, which gives you an additional two-month extension. Let’s take a look at each of these forms.

Form 4868

As mentioned above, this is the first type of extension option that is available to the taxpayer. All that is required on this form is your name, address and social security number. You have to estimate your tax liability and send in any balance due. As long as you make this payment and cover at least 90% of your real liability, you will not be required to pay a late filing or late payment penalty. There are lots of tools that are available to you that can help you estimate your real liability with the click of a few buttons.

You must file it by the regular due date of your return, usually April 15th. It is an automatic extension. You don’t have to give the IRS any reason. You can get it even if the only reason you haven’t filed is you were lazy or didn’t want to think about it.

Form 2688

You can get a second extension by filing Form 2688 before the first extension expires. This extension gives you an additional two months, until Oct. 17, , to file your return.

Unlike Form 4868, you will have to provide a reason for the request. And IRS is known to accept any ‘reasonable’ explanation that is given to them. They are also known to be very consumer friendly and allow the taxpayer a few days to submit the income tax in case of a denial of the request.

However do keep in mind that these extensions only extend the date for filing, NOT for paying. If you don’t pay at least the 90% of the real liability by the due date, you will incur interest and potentially a penalty for late payment. So it is very important for you to send in any balance with the Form 4868 even if your tax return is not complete. Again, don’t be fooled by thinking that the automatic filing extension is also an automatic paying extension. There is a distinct difference between the two. And many people get into trouble because of their inability to understand that difference.

Online Tax Pros provides consumers with the ability to file for extensions. This is done with the click of a few buttons on our website. If you are one of those people that are not able to file your income taxes on time, we encourage you to take advantage of this opportunity.

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