April 15 is coming fast. For some of us, it’s coming too fast. We might not be quite ready to file our federal and state income taxes for one reason or another.
Most people know they can file for an extension and get extra time. They may hate to do that, however, if they’re not sure how. It may even seem like a cop-out. It’s not.
Here are 5 perfectly good reasons to file a tax extension:
1. When you don’t have all your information yet
If you have a small business, for example, you may still be working on the books. Or you could be waiting for a letter confirming a charitable contribution, or you still need the basis of stock you sold.
2. When a partnership or other organization hasn’t sent out forms
If you are a partner in a business, you may not receive your Schedule K-1 in time to file.
3. When you have an emergency that prevents you from completing your return
Hospitalization or ill health, long vacations, a family emergency, or just crunch time at work can make it difficult to finish your return. No worries. Give yourself a little more time for this important financial task.
4. When you need more time to make contributions to or change a retirement plan
Some retirement plans can be funded or even set up in the year following the tax year. You may even want to reverse a Roth IRA conversion. It’s best to wait until you’re sure what to do.
5. When you want to make elections on your return, and you won’t know which election is best until later
For example, say you have losses that you can carry back to prior years. You may not know until later in the current year if that’s a good idea, or if you should use the losses in the future.
Here are 3 not-so-good reasons to file a tax extension:
1. If you think you owe more tax, and you want to file an extension to put off paying it
You’ll still owe interest and penalties on the amount you should have paid.
2. If you have a substantial refund coming, so you’re just not worried about it
File your return and claim your refund. You can think of better things to do with it than leave it with Uncle Sam.
3. You file an extension out of habit
You’ll end up being just as panicked six months from now, when the extension runs out.
How to file a tax extension for free in TaxACT
Filing an extension doesn’t completely get you off the hook, especially if you may owe more tax. Go through the Q&A steps in TaxACT, estimating information if necessary.
In the Filing step, enter information for an extension.
To go directly to the section for filing an extension, click the Filing tab, and then File Extension and follow the instructions.
You can then print or e-file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, as well as the necessary state forms.
Be sure to make a payment with your extension if you estimate you will owe more tax. An extension does not give you more time to pay.
Do you think it’s better to prepare your return as soon as possible, or wait?