Income tax extensions: What to know

Tax Day is usually April 15 unless the federal government changes it for a given year. The day marks the final deadline to file your income tax return with the Internal Revenue Service (IRS).

For many Americans, especially those with more complex taxes, filing their income taxes by the deadline is challenging. 20 million taxpayers file their tax returns after the due date.

Fortunately, if you need more time, you can file an income tax extension by submitting the correct form to the IRS. Keep in mind, the extension pushes your filing deadline back six months to October 15, but it doesn't buy you extra time to pay any taxes you may owe on your return.

If you're struggling with tax debt and are looking for help, an expert can assist you. Reach out today and see what kind of relief you're eligible to receive. 

How to file an income tax extension

There are two methods to request an income tax extension: Mail Form 4868 or make a (partial) tax payment electronically. In either case, the IRS states you must file your request no later than your regular tax filing deadline. Also, filing your taxes late without a tax extension could leave you on the hook for paying tax-filing penalties.

According to the IRS, the fastest and easiest option to file a tax extension is to submit Form 4868 using the IRS Free File service. Form 4868 is a simple one-page form that asks for your name, address, Social Security number and estimated tax liability. You can also mail the completed paper form to the IRS, but make sure it is postmarked by the tax return filing deadline. 

Your other option to file a tax extension is to make an electronic tax payment before the filing deadline for some or all of your estimated income tax due using Pay Online. When making your payment, note the payment is for a tax extension and save the confirmation number for your records. By doing so, the IRS will treat your note and payment as an extension request.

If you're filing for a federal tax extension, ensure you also meet your state's filing requirements, which may vary. The Federation of Tax Administrators offers a helpful resource to access your state's tax agency website to discover the specific rules for your state.

If you have existing tax debt and are not sure of what to do next, an expert can also help. 

Reasons why you should file an income tax extension

Filing for a tax extension may be a good option as extensions deliver several benefits. Conversely, you might review some of the downsides of a tax extension and determine it may not make sense for you.

Pros of filing an income tax extension

• Avoid late-filing penalties: Filing an extension before the tax deadline could help you avoid a late-filing penalty equal to 5% per month on your tax due.
• More time to prepare a more accurate return: If your taxes are complicated or you're still waiting to receive necessary documents, adding six months to your timetable will give you the extra time you need to file accurate taxes and take advantage of legal deductions.
• More time to fund a retirement account: If you're self-employed, filing for a tax extension gives you an extra six months to fund a retirement savings account, including an Individual 401(k) plan or a Simplified Employee Pension (SEP) IRA. 

Cons of filing an income tax extension

• Delay of your tax refund: One significant disadvantage of filing an extension is that you must wait longer for your tax refund than if you file on time.
• No extra time to pay: An extension gives you more time to file but not more time to pay your tax bill. Unless you pay your estimated tax debt by the deadline, you'll be subject to late-payment penalties and interest.
• Must estimate your tax due: The IRS may deny your tax extension request if you don't include an estimate of your tax due amount based on information available to you when you file your extension.

It's important that you carefully consider your options when thinking of asking for an income tax filing extension. If you have existing tax debt - or find yourself in a precarious position with other forms of debt - you may also need to work with a credit repair professional to get your finances back in order. Consider contacting one today to ensure your finances are accurate and up to date.

Special rules for tax extensions

The IRS allows certain taxpayers extra time to file their taxes without needing to file for an extension, including:

• U.S. citizens and resident aliens residing and working outside of the United States and Puerto Rico: Individuals in this group automatically receive a two-month extension and a tax deadline of June 15. Still, any tax due must be paid by the April tax deadline to avoid interest charges.
• Active duty military personnel serving outside of the U.S. or Puerto Rico: These servicemembers qualify for an automatic two-month extension and do not need to file Form 4868.
• Taxpayers affected by disaster: If the President declares a disaster in a particular area, the IRS can postpone deadlines for the people and businesses in the impacted area.

Do I need to file an extension on my taxes?

If you're expecting a refund on your tax return and you're not applying the funds towards next year's taxes, you may not get many benefits from a tax extension except the extra time to file your return. 

While a tax extension won't free you from paying what you owe, it will give you breathing room to submit a complete return. If you won't be able to gather your tax documents and complete your return by mid-April, apply for a tax extension before the due date. The extra six months should give you peace of mind and be well worth it.

And, if you have current tax debt, you can work with an expert to start reducing what you owe.