You're poring over your paperwork
Sound too good to be true? It almost is. Filing for an automatic extension does not give you more time to pay. In fact, you must still estimate the amount you owe (if you owe, that is) and pay it by check, money order or credit card by April 15. "There's really no good reason to file an extension if you've already done your paperwork," says Bill Ahern, Communications Director of The Tax Foundation, a Washington, D.C.-based organization devoted to explaining tax policy to the public. So what's a "good" reason to file an extension? "A common scenario would involve a procrastinating taxpayer who finds herself with disorganized records as April 15th approaches. At the last minute, she runs to a tax preparer for help, only to find that other clients have priority. At that point, the tax preparer will help her file for an extension."
How to File
If you do need the extra time to avoid being charged a late-filing fee (see Repercussions for Filing Late, page 3), the filing process is fairly simple, even if you're not using a tax preparer. You should have last year's tax return information available when filing an extension and making a payment. You can file for an extension in several ways:
Download Form 4868 from the IRS Website, complete it and mail it along with payment (check or money order made out to the United States Treasury) of your estimated tax owed. Click here for a link to a downloadable version of this and other extension forms.
File by phone. Call (888) 796-1074 and follow the automated instructions. You must have filled out a Form 4868 as a worksheet in order to complete the process by phone. You will be asked questions about last year's tax return, so have it available.
File online using a service listed on (but not endorsed by) the IRS Website.
File online using tax preparation software, such as Quicken TurboTax.
File with a professional tax preparer, such as H&R Block.
Estimating Your Tax
In order to estimate how much you owe, you can use last year's return as a benchmark if nothing much has changed in your financial life (including marital status, investment activity and income bracket). Otherwise you
If you are living outside the United States, you are automatically allowed a two-month extension on filing your return and paying taxes (due date of June 15), no paperwork involved. However, you will be charged daily compounded interest (currently around six percent
Repercussions for Filing Late
Even if you cannot afford to pay all of your taxes, you should still file your return
If You Can't Afford to Pay
When you file your return or extension, include a check for as much as you can afford. For the remainder of your balance, either make a written request for a payment plan or fill out a Form 9465. The IRS has information online about late payment options. It accepts payment by VISA, MasterCard, American Express and Discover Card. (One thing to remember: Your credit card will charge you interest; so pay it off as soon as possible.) Also keep in mind that each month the IRS charges 1/2 of 1 percent of any unpaid balance after April 15. The maximum penalty cannot exceed 25 percent of your unpaid balance. It's always best to pay as much as possible and to pay on time.
If You Still Need More Time
If, after receiving the automatic four-month extension, you find you need still more time to file, you can file a Form 2688 for an additional time