A busy life or unexpected life event can interfere in the filing of tax returns within the stipulated deadline. But you need not worry if you need more time to track down or arrange your missing tax documents as you can always file for the extension.
Although, tax extension makes sense in certain situations there are many complications which can confuse you. The following are the important facts that you need to know before filing for a tax extension
1) An easy task to file extension
The IRS provide you with easy options to file for an extension through e-filing the request on its site. Taxpayers can fill the Form 4868 and email to the IRS before the tax due date. Moreover, an automatic six months extension for filing returns will be granted if you have paid all or part of the taxes electronically within due date by estimating the amount owed using federal tax calculator.
2) Extension of filling doesn’t mean more time to pay
The term ‘extension’ is misleading and can land you in a serious problem. The extension will give you six months more to complete your paperwork and file your tax return, it doesn’t give you extra time to pay the taxes you owe. You must estimate the amount to be paid and submit it with the extension else be ready to face failure-to-pay penalties and interest on the taxes you owe to IRS.
The government holds your tax refund until you get your documentation sorted and submit the same during your extension period. You will get your tax refund the moment you file your paperwork.
3) IRS offers help
The IRS offers help to taxpayers who cannot pay their taxes in time due to financial hardships. They provide various payment options such as installment agreement with Online Payment Agreement Application on their website. They assist people who face money crunches and work out plans with them.
4) You won’t be audited due to extension
Many taxpayers avoid filing the extension because of the fear of drawing unwanted attention from the IRS. But, in fact, filing an extension lowers the risk of being audited. The extension is simply provides extra time to verify your data and file accurate information to the government.
Though, if you rush through submitting your return you are likely to make major mistakes such as transposing numbers or failure to report any income, which can definitely land IRS people at your doorstep.
5) No reasons asked for the extension
The IRS does not ask for specific reasons from the taxpayer filing the extension. It grants the grace period of six months automatically to the person who simply asks for it, requests and has filled the application form correctly with accurate information. However, the IRS can reject your request if the data file does not match with their records.
6) Can I file the return before the due date of extension
While October is the deadline for the extension, you need not wait for that long if you have finished your filing work before the last date. You can always submit your tax return prior to the date once done with it.
7) IRA contributions not included
The extension in file return does not allow you to make IRA contributions and get tax deductions. Even you cannot recharacterize your traditional IRA contributions to Roth IRA and vice versa.
A tax extension is a useful tool to finish your taxes if you are running late for the deadline. You just need to figure out the amount, this can be done with the federal tax calculator, pay the tax and file for the extension. It is a simple and straightforward way to earn more time for your self to file the best possible tax return.