What Does a Personal Tax Extension Mean for You?

Every year, the IRS sets a specific deadline for your taxes to be due. For most businesses and individuals, the deadline falls right around April 15th. There are some exceptions to that rule for filers who use a fiscal year, or who fall under certain business categories, or when the typical April 15th tax deadline falls on a weekend or holiday. Regardless of the date, sometimes it can be challenging to collect all the data and get your taxes prepared to send by the deadline.

This is where a personal tax extension comes in.

What exactly is a personal tax extension, and what would filing one mean for you? Keep reading to find out all of the important details.

What is a Tax Extension?

According to the IRS, a tax extension is defined as being given an extension to the initial deadline of your tax filing. The extension is 6 months from your original filing deadline. For those whose taxes are due on April 15th, or April 18thin 2023, this means that with an extension, we have until October 15th to get our taxes filed, or October 18th in 2023.

The tax extension allows you more time to gather necessary information, prepare the details, and get the tax forms completed and sent. But what does the extension mean for you in the end?

How Will a Tax Extension Affect You?

A tax extension filing is meant to offer you a benefit of extended time. The IRS recognizes that by the time you get some forms, it can be hard to throw things together. And if your taxes are at all complicated with extra schedules, this can be even more challenging.

Whether you file on your own, or use a CPA, you may just need some extra time. That is perfectly fine! You can file a Form 4868 for the additional 6 month personal tax extension or use a service such as ours to submit your request electronically.

But there are more details to understand. Yes, the extension provides you extra time, but you should be aware of precisely how it works.

When you file an extension, the IRS requests that you estimate what your taxes are going to be. You should pay the estimated amount owed by the original tax deadline. You may not have a set amount, but paying even an estimated amount will work in your favor.

In addition, you need to be sure to file that extension by the regular due date of your return.

Simple Steps to File Your Tax Extension

So, how exactly do you file an extension? Its easy! And we can help you with the process too. An extension is filed using Form 4868 from the IRS. If you use a tax preparer, or a tax software, they can help.

There are three main ways to file your extension.

• Do it yourself through a tax software
• Use a CPA or tax professional to file
• Print and mail the extension form to the IRS

How you decide to go through the process is up to you. However, it can be a good idea to have a secondary resource to help with the details. Remember that you need to pay estimated taxes when you file the extension. If you anticipate a refund, you wont need to pay anything now.

File the tax extension on time to avoid any penalties on a late filing of your return.

Will I Have to Pay Penalties for Filing an Extension?

Many people look down at the possibility of filing an extension. But the truth is that this is a valuable resource, and it helps a lot of taxpayers every year. Anywhere from 18-20 million people file an extension every year.

Filing an extension on time will never cause you a penalty. However, if you file your tax return late, or fail to pay estimated taxes due, then you could have a penalty to contend with. The IRS has very strict penalties. While there are exceptions and abatement processes, its important to try to avoid the penalty situations.

• Interest will be charged on any unpaid taxes as of the original tax deadline
• If 90% or more of taxes owed is not paid on time, you incur a late fee plus interest
• If you fail to file an extension and pay, you will owe a late filing penalty, plus penalties and interest on any taxes owed

These rules are why it is highly recommended to obtain an extension if you are unable to file on time, and at least make a payment estimate when you file your extension. Get that in place, and then take the time you need to finish preparing the return for filing.

Conclusion

Not everyone will need a personal tax extension, but there are a large number of people who benefit from the extra time. Even if this is a one-time situation, use extensions when you need them, giving yourself an extra 6 months for filing.

You dont have to figure out the steps alone. Taxes can be overwhelming for many. If you need to consider an extension, we can help you get the process started, and maybe even save some money too.