The strenuous amount of time and energy that has to be spent on filing tax returns is one of the main reasons not to do it. Apart from procrastination and negligence, most of the times, people fail to file their tax returns before April 15 either because they are caught up in their busy schedule or waiting for all the required tax documents. Recognizing this inevitable need of some extra time, the IRS allows for an extension period of 6 months, ie it allows for postponing the deadline to file tax returns from April 15 to October 15. This way people who are too busy with their personal or professional commitments can buy some time to gather all their tax documents, review them thoroughly and come up with a tax return that is in their best financial interests. One must file a tax extension before April 15 to avail it and it's really simple and easy to learn how to file a tax extension. This article will narrow down the things one must do in five simple steps to know how to file a tax extension better.
1. Before knowing how to file a tax extension, it is wise you understand the features of tax extension and the limitations it comes with. An IRS tax extension essentially allows one to postpone the filing of tax returns by 6 months, but doesn't permit to do the same on tax payments. If you owe taxes to the government, then you are liable to pay it up on or before April 15. So, it wouldn't be a smart move if you file for an extension hoping you could delay the payments.
2. Secondly, though an extension is provided until October 15, the last date to file an extension remains April 15. Provided you fail to do so, you must pay the penalties for late filing, which would be 5 percent of the unpaid taxes to a maximum of 25 percent. In addition, if you are unable to pay the due tax amount before April 15, the failure-to-pay penalty gets added to the failure-to-file penalty. Generally, failure-to-file penalty is more than the failure-to-pay penalty.
3. So no matter how busy you are, it is necessary to file a tax extension before April 15 to avoid penalties. The first thing to do in this regard is to get your hands on the form 4868 if you are filing as an individual and form 7004 if you are filing as a business entity. These forms can be accessed online, either on the IRS website or free e-file providing websites. Your name, contact details and social security number are the only things you would need to complete the filing. Prefer e-filing if you want it to be done within 5 to 6 minutes. Yes, tax extension is really that simple!
4. Remember to make no entry mistakes or provide wrong information as this could be the only possible reason for the IRS to disapprove your plea to extend. The IRS generally approves of an extension, no matter what the reason. One of the perks of e-filing is that you can track the status of your application and also receive a confirmation mail once you get the approval.
5. Lastly, with the time provided, gather all the documents you would need, in-depth research you have to make and try filing a tax return that's as accurate as possible so that you have to pay the least taxes and get good deals on tax refunds too.
These are the five simple points you must know on how to file a tax extension. Go through more details about how to file a tax extension on the IRS website and if you are almost ready with your tax returns before April 15, rethink on the idea of extending the deadline, as it is not at all necessary in such a circumstance.