Sometimes April 15 rolls around faster than expected. Despite best intentions, extenuating circumstances could mean that filing your taxes on time just isn’t an option. If this scenario sounds familiar, filing an extension may be the best course of action. Fortunately, the IRS offers the option for both individuals and businesses. The Virginia Society of Certified Public Accountants (VSCPA) offers tips to ensuring your extension is a success.
Why File an Extension?
Perhaps you’re a business owner and have not received all of your tax documentation in time for the April 15 deadline. Or you’re an individual with a complicated tax situation and need more time to work with your CPA to ensure your paperwork is correct. Maybe you’ve had a family emergency or illness that left you unable to complete your return by April 15. If you fall into one of these categories, you may want to consider filing an extension. The good news is the IRS doesn’t need to know the reason you’re seeking an extension as long as your request is filed by April 15.
How Much Time Does it Buy Me?
An extension is for six months after April 15, so October 15 of the same calendar year. This assumes you submit your request by April 15. But — and this is important to remember — filing an extension does not mean you get an extension on paying your taxes. You still need to make an estimated payment by April 15. Failure to pay by the deadline will result in penalties, interest and late fees.
If I Can’t Pay All of the Tax I Owe, Should I File an Extension?
In short, yes. The IRS can access both a failure-to-file penalty and a failure-to-pay penalty. Although the IRS will charge you penalties and interest on any tax due, you can avoid the more severe late payment penalty of half a percent per month if you file on time. According to the IRS, the penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. Filing an extension by the April 15 deadline and paying what you can is the best way to avoid the failure-to-file penalty. The IRS also offers payment plans if you cannot pay your taxes in full.
How Do I File for an Extension?
To file an extension, you’ll need to submit Tax Form 4868. If you’re working with a tax professional such as a CPA, he or she can do this for you. If not, you can e-file the form or complete a paper copy. The most important thing to remember is that the IRS must receive the form, and your payment, by April 15.
Do I Need to File an Extension if I’m Stationed Overseas?
The IRS automatically grants military personnel serving overseas a two-month extension beyond the April 15 deadline. There’s no need to file an extension — the extra time is automatic. If you’ll need additional time beyond the two months, you should file an extension.
Turn to Your Local CPA
Your local CPA is the best person to help you understand your tax situation. Be sure to contact him or her with all of your financial questions and concerns.