Tax Extensions: A New HomeBuyer’s Best Friend
April 15th is the date that causes working Americans to shudder. Tax Day. Even if you don’t owe any taxes, the paperwork alone can be overwhelming. The choices are pretty bleak: either wade through the pages of instructions, boxes, and “Lines 1, 14, 32 …,” or pay an accountant to handle it for you. But what if April 15th comes and you can’t file?
Many circumstances cause people to miss that April deadline.
Perhaps a relative is sick. Maybe you’re moving or starting a new job. Or maybe your toddler accidentally fed your W-2 to the family dog. Whatever the reason, this may be the year you need to file for an extension – IRS-approved extra periods for filing. Robert Job, of Ocala, FL, has filed for several extensions since starting his own business over a decade ago. “Self-employment means tracking down lots of paperwork and receipts for deductions,” Job says.
“Between collecting the forms and running my business, I really needed extra time to make sure everything was completed correctly.”
As ominous as that April 15th deadline may seem, extensions are
surprisingly easy to file. If you qualify to file a 1040 for your taxes, or you live overseas (including members of the military), all you need to do is fill out a Form 4868, which is only about a halfpage long. The form asks for your estimated tax liability, so it’s good to have a W-2 or pay stub handy. You can find this form on the IRS Web site: http://www.irs.gov/pub/irs-pdf/f4868.pdf)
There are also several Web sites, such as tax9er.com and http://www.TaxExtension.com that allow you to file this form online and receive a confirmation from the IRS right away. After filing the 4868, your new deadline without paying late filing penalties will be August 15th.
If four months is not enough time, pick up Form 2688: (www.irs.gov/pub/irs-pdf/f2688.pdf) to request up to an additional two months. This form is more comprehensive than the 4868; the additional two months requires an explanation for the needed extension. It is also possible that the 2688 will be denied, and then your taxes will still be due by August 15th. The IRS describes the 2688 as for circumstances “beyond the preparer’s control,” so the reason must be one of importance.
A caveat accompanies any extension for which you decide to file.An extension to file is not an extension to pay. If you’re expecting a refund from Uncle Sam, then no worries–the government doesn’t mind keeping your money until you file.
But if you file late and owe taxes, you should include the payment with your 4868 form. The penalty is 1/2 of one percent of the taxes owed for each month you pay late–up to 25 percent!
Also, you will owe interest of about six percent compounded daily over the late period, which can quickly add up. If you can’t pay the taxes you owe, you can file another form,a 9465 found at:
to request the IRS to set up a payment plan for you. Extensions are definitely a welcome alternative for those who can’t file by April 15th.
The IRS charges a late filing fee for those who miss the deadline, so why not take the time to fill out a short form? No matter what form you decide to file, please check with the IRS or your accountant to make sure you’re on the right track.
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