Tax Extensions 101 from Outright.com
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How familiar are you with the concept of the tax extension? As a taxpayer, you’ve undoubtedly wished at some point that you had just a little bit more time to complete your forms and get all your tax information ready to send in.
And of course the IRS offers a way for you to do just that – the tax extension. For those who’ve never used it, the extension is a convenient way to gain more time to complete forms, organize receipts, and whatever else you need to do before filing – and there’s no stigma attached. The IRS won’t scrutinize your taxes more if you file an extension, and it’s almost unheard of for an extension request to be denied.
However, there are a few “catches” to the process you may be unaware of. So before filing for an extension, there are a few things you should know.
How Tax Extensions Work
There are a myriad of reasons why you could file for a tax extension, and not all of them have to do with you being lazy. Sometimes life just gets in the way and there’s nothing you can do about it! Maybe you received a 1099 or W2 extremely late or found a box of receipts at the very last minute. You don’t want to just rush through your taxes in this case, so you file an extension. No problem.
What’s nice about the process is the IRS, for the most part, will automatically grant the extension to you. All you have to do is grab Form 4868, the application for automatic extension of time, fill it out, and send it in before mid-April. You now have an extension on your tax filings.
There are other tax extension forms for people with special circumstances. For instance, Form 2350 is for US citizens living abroad, and Form 5558 is for certain employees who have special employee plan returns. There’s also Form 7004, which is specifically for corporations to have more time to file business income tax and other information.
While the majority of tax extensions are granted automatically, payments due is another thing entirely. The IRS naturally may not care so much if you fail to file on time and they owe YOU money, but if the situation is reversed, you better believe they will start the collection process as soon as they can.
To this end, you should know that filing for a tax file extension only extends the very act of filing your taxes. This means if you owe money to the IRS you have to pay it, or at least file paperwork to start paying it back in increments.
Does it make sense? Not entirely, but what can you do, right? You may think it’s impossible to pay an amount you’re not sure you owe yet, but all you have to do is figure out what you might owe and include the payment. Later, when you actually file, you’ll get the real figure and either pay more or get some back from Uncle Sam.
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