Most people should have their individual tax forms and payments sent to the Internal Revenue Service (IRS) on April 18 of this year. There is not much time left for tax preparation, but filing a tax extension could buy you more to get your paperwork together. You can file Form 4868 for free to get a federal tax extension.
What the Extension Does Not Give You
Although filing a federal tax extension will give you more time to calculate your tax liability and send accurate tax forms, TaxAct says that it does not give you more time to pay any taxes you might owe. You still need to estimate your taxes and should pay all you owe when your federal taxes are due.Getting an IRS Extension
The Internal Revenue Service states that you can get an extension another way. You can pay all or part of your taxes and make it known that you would want an extension. If you indicate you want an extension when sending your payment, it is not necessary to send Form 4868 separately.Even though you may be unable to calculate your federal tax return completely by the tax due date, the IRS says you should attempt to fill in the tax form as much as possible. Estimate the blanks you are unsure of and send them in on time to avoid the late payment penalty—which is 5 percent of taxes not paid on time.
Self-Employed People May File Earlier
If you are a freelancer or self-employed, you can file for a federal tax extension when the first quarterly payment is due—by January 15. When you file before your first quarterly payment due date, you have until Oct. 16 to send your paperwork. Your estimated quarterly taxes, however, are due on Jan. 15.Some People Qualify for an Extension Automatically
Some people are automatically exempt from having to pay their taxes by April 18 or file an extension to get more time. The IRS says that if you are living outside of the United States and Puerto Rico—and work primarily outside of the United States—you have two extra months (until June 15) to file your taxes. Military personnel, and those in naval service, who are on duty outside of the United States and Puerto Rico, are also given extra time.People in the above category must also pay taxes owed on their due date. Tax penalties will occur on any taxes not paid by that time. Although given an automatic extension, it expires at the same time that everyone else’s extension expires—Oct. 16.
The Possible Penalties You May Need to Pay
There are two types of penalties that you may need to pay if you pay taxes late—even if you had an approved extension. The first penalty is 5 percent of taxes owed after tax day. There is also a penalty of 5 percent if you do not file.A second penalty is that you will be charged interest on the amount still owed. It is 0.5–1 percent for each month you are late beyond the due date. According to FlyFin, the maximum penalty is 25 percent of the overdue taxes.
How to Avoid Underpayment Penalty
It is possible to avoid underpayment penalty by making sure that you pay enough, BusinessInsider says. You either need to pay at least 90 percent of the tax owed or 100 percent of how much you paid in taxes the previous year.Married couples earning more than $150,000 or more need to pay 90 percent of the taxes due or 100 percent of the previous year’s taxes—whichever is less. Individuals and married couples filing separately and earning more than $75,000 should pay 110 percent of the amount owed in the previous year. BusinessInsider reports that you may be able to avoid the tax penalty if you owe less than $1,000.
How to File Form 4868 for Free
Filing for an extension is quick, and you do not need to offer an excuse as to why your tax forms are not yet complete. The IRS gives you three ways to send in Form 4868. You can pay online and indicate you need an extension on the IRS’s website; you can make a payment with Form 4868 through IRS Direct Pay, through the Electronic Federal Tax Payment System; or you can use a credit or debit card. You also can get a tax expert to file it for you, as well as by filling out a paper Form 4868 and mailing it in with a tax payment.Receipt for Form 4868
The IRS does not consider you to have been granted an extension until you receive a receipt from them. Filing by regular mail likely means you will probably not hear from them—just assume you are approved.When you file a tax extension electronically or have a tax agent file for you, you will get a response quickly because they are automatically handled by a computer. If it is rejected, it is most likely that you entered data incorrectly. Resubmit a corrected form and make sure your Social Security numbers are correct.
When Payment Is Impossible
It is possible that you are not able to pay your taxes on time. RamseySolutions points out that you should file an extension anyway—along with a payment of what you can afford. The penalty for not filing is 10 times greater than late penalties and interest. If you are still unable to pay your taxes after six months, contact the IRS and try to get a payment plan approved.With so many ways to get a federal tax extension, you should be able to send it in on time. The IRS only requires that it be sent by April 18th electronically, or it needs to be postmarked on or before April 18.
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