We get it. Time flies. And if time has gotten away from you when it comes to filing your taxes, not to worry; you can file for a tax extension. While a tax extension might seem faux pas, it’s actually relatively common. In fact, out of approximately 140 million U.S. tax filers, there are about 10 million businesses and 5 million individuals who file tax extensions annually. If spring is your busy season, file for a tax extension. If you had an emergency earlier this winter, file for a tax extension. If you simply haven’t gotten your records together, file for a tax extension. There has been no evidence to show that filing an extension leads to an audit. And because the IRS doesn’t ask you to provide a reason for your extension, there’s nothing to worry about. However, even though you’re considering an extension, there are still a few things you need to know:
Understand what forms you need.
Your business type determines which form you’ll need to file when requesting a tax extension. Most businesses can use a Form 7004 to file for an extension, but sole proprietors need a Form 4868. The IRS website has extensive directions for both forms which is helpful, especially if this is your first time filing an extension. Find directions for Form 7004 here and for Form 4868 here. You also need to make your request in a timely manner which means well before April 15th.
Estimate what you owe…and pay that.
In addition to the forms above, you’ll have to estimate what you owe and pay that amount by the original due date. Gather your records of earnings and expenses and get to work on estimating your taxes. Remember, a tax extension doesn’t give more time for payment. Whether you’re sending your extension form via snail mail or via the web, you still need to pay an estimate of what you owe. And keep in mind if you don’t send payment, the IRS could deny your extension.
Be as accurate as possible…and err on the side of overpayment.
The IRS may issue costly interest charges if you underestimate the amount of taxes you owe. And, if you don’t make a good estimate, or are far off from the actual total, you could be subject to a penalty. Be as accurate as possible, be sure to crunch those numbers more than once and speak with a tax professional for any help you might need.
Complete an official return in the fall.
While you can file for a tax extension, you’re going to have to face your taxes eventually. Keep your new deadline in mind as you prepare for your fall. If that means avoiding business trips, skipping workshops and sending a representative to trade shows in your place in the name of getting taxes done, that’s just what you might need to do. However, rest easy after your extension is accepted and use your newly found time wisely.