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How to file for a tax extension

Life happens, and while you’ve got a couple extra days to do your taxes this year, you may still need more time to put your tax return together. This year’s deadline for filing your 2015 income taxes falls on April 18, 2016 for most states, or on April 19th, if you live in Maine or Massachusetts—but if you need more than those 3 or 4 extra days to catch up, then this post is for you.

Reasons to file for a tax extension

For millions of taxpayers, there may be a good reason to ask for an extension. Here are some examples of when you might need more time:

  • You have a complicated financial situation, such as income from an estate planning matter
  • You bought or sold real estate last year
  • You are in the midst of a divorce proceeding
  • Your spouse died in the last calendar year
  • You are a small business owner who does not have all of the information needed to file by the April deadline

If any of these situations sounds like yours, then you may want to consider filing for an extension, so that you have more time to gather the necessary paperwork and information to complete your tax return.

Filing a tax extension form

Getting an extension to file your Federal tax return is as easy as filling out a tax extension form, however it is important to know that you have some options. In order to file for an extension for your Federal income tax return, you have three choices:

  1. You can electronically file an Application for Automatic Extension of Time To File U.S. Individual Income Tax Return (Form 4868)
  2. You can file Form 4868 in paper form and enclose a payment of your estimated tax
  3. You can pay all of your estimated tax through one of the various IRS payment options and indicate that the entire payment is for an extension

The good news is that many filers ask for an extension, and if you file Form 4868, you do not have to explain why you are asking for the extension to the IRS.

To successfully file Form 4868, you will need to do the following:

  • Estimate your 2015 tax liability using the information available to you
  • Enter your total tax liability on line 4 of Form 4868
  • File Form 4868 by the April due date of your return

When filing for a tax extension with Form 4868, you will only hear from the IRS if your request is denied. Otherwise, you can assume that your six-month extension is granted, and you’ll have until October 17, 2016 to complete and file your income tax return.

Do I have an extension on payment?

Filing Form 4868 does not grant you an extension on the taxes that you owe.  If you do not pay your full tax amount due by April 18, 2016, you will owe interest on the unpaid tax amount and you may be subject to a late payment penalty. The penalty may be waived if you can show a good reason for not being able to pay by April 18, 2016.

If you are unable to pay the full amount of your taxes owed by the deadline, the IRS recommends that you still pay as much as you can to avoid penalties and interest. The agency may also be able to provide you with some alternative payment options such as a short-term extension on payment or an installment plan.

Extensions on state income tax returns

If you are considering filing for an extension on your state income tax returns, make sure to check your state-specific rules. Nine states do not have income tax returns, and if you are fortunate to live in Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, then you will not have to complete any additional paperwork. Other states, like New York, require the taxpayer to request an extension (mostly automatically granted). And other states like California will automatically grant you an extension without any additional forms.

Remember that applying for an extension to file does not mean that you get an extension to pay the tax balance. To avoid interest and fines, it is always a smart idea to send an estimated payment of what you might owe to both the state and Federal governments.

If you have questions about your specific tax situation, you can always ask a tax lawyer or contact the IRS directly.

Amanda Gordon, Esq.

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