For many of us, there never seems to be a convenient time to get everything together and prepare our taxes.
That sometimes means filing for an automatic extension of time to file your income taxes.
This is a smart move if you don’t have all your information yet. It may be your only choice if you’re waiting for a partnership or other organization to send out forms, or if an illness or emergency prevents you from completing your return.
3 easy steps to filing for an extension
It’s easy to get a six-month extension of time to file your federal return. Use IRS Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
Here’s how to file your extension:
- Go through the Q&A steps in TaxACT. It’s OK to use estimates. (Be sure to use TaxACT Bookmarks for estimates so you can easily confirm or change the amounts when you go back to finish your return.)
- In the Filing steps, enter information for an extension. If you’ve already been working on your return, you can go directly to the section for filing an extension by clicking the Filing tab, and then clicking File Extension and following the instructions.
- While you can print and mail Form 4868, it’s recommended to e-file the form since you need to file this form by April 15.
Don’t forget to make a payment with your extension if you think you will owe tax.
An extension does not give you more time to pay. If you put off paying tax you owe, you could end up paying penalties and interest.
If you need to file a state income tax return, don’t forget to file for a state extension as well.
3 reasons not to file for an extension
Filing for an extension is easy – perhaps too easy. It can become a habit.
Before you automatically file for an extension, consider these facts:
One: If you think you owe more tax, but aren’t sure how much, you’ll probably pay too much tax with your extension or not enough.
If you pay too much, you lose the use of your money for now (to use to pay down debt or invest in retirement savings).
If you pay too little, you’ll still owe interest and possibly penalties on the amount you should have paid.
Two: If you have a substantial refund coming, you should get your refund as soon as possible and use it to work toward your financial goals.
For example, if you have high interest credit card debt, you could save considerable interest by getting your refund now and paying down your debt sooner.
Three: Filing for an extension is a lot like filing your return.
If you wait almost the full six months to finish your return, you’ll have to drag out all your information and remember what you were doing. It’s like doing your return twice!
If possible, once you have your return started you’ll save yourself time and trouble by finishing and e-filing it by April 15.