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Tax Time: What to do if you’re not ready

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You’ve marked the date on your calendar, and you’ve done your best to get all your paperwork in order. But what happens if come April 17, you’re just not ready?

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You’ve marked the date on your calendar, and you’ve done your best to get all your paperwork in order. But what happens if come April 17, you’re just not ready?

If it’s any consolation, you’re not alone. According to FileLater, a tax-extension service, more than 10 million people filed income tax extensions, and last year, an estimated 12 million taxpayers had no choice but to request more time. If filing on time just isn’t in the cards for you this year, worry not. Requesting an extension is easier than you’d think.

How and When to File
To file an extension, simply fill out Form 4868 and submit it either by mail or online. All you need to do is file this form by April 17th and you’ll be granted an automatic six months of leeway, thereby extending your deadline until October 16th.

Believe it or not, you don’t need a specific reason to request an extension; the IRS won’t care if you’re filing your extension due to sheer laziness and procrastination as long as you do so on time. But if you happen to have a complicated financial situation, filing an extension is more than justifiable. The same holds true if you’ve yet to receive all of your tax information from your employers. This is something that frequently happens to freelancers and those who hold multiple jobs.

Another good reason to request an extension is to allow your accountant extra time to review your paperwork during his or her busy season. Many accountants find themselves overwhelmed in the weeks leading up to Tax Day. If you require the help of an accountant but can’t find one to squeeze you in, an extension can buy you the extra time you need for a professional to assist with your filing.

The Downside of Tax Extensions
One thing to keep in mind is that filing an extension doesn’t give you extra time to pay the government any money you might owe; all it does is offer you six extra months to complete your paperwork. What this means is that you need to have a general idea of what you owe the government by April 17th and pay that amount on time to avoid late fees and penalties. For many, this defeats the purpose of filing an extension in the first place.

Similarly, you must be sure to submit Form 4868 on time if you want to avoid a failure-to-file penalty. The failure-to-file penalty is usually 5 percent of the unpaid taxes that are due, whereas the failure-to-pay penalty is half of 1 percent of your unpaid taxes, according to the IRS.

Another point to consider when requesting an extension is whether you’re owed a refund. If you think you’ll be getting money back from the government, you’ll have to wait even longer for that refund check should you choose to file an extension.

So What Should You Do?
If you’re worried you won’t be able to file your taxes correctly by April 17th, be it due to a lack of information or a lack of time, your safest bet is to request an extension and do your best to estimate how much you owe the government. If you’re convinced you owe nothing or think you might end up owing a truly minuscule amount, you can take your chances and wait till you’ve got your paperwork in order to whip out your checkbook. (The penalty for a $100 underpayment, for example, will be a mere $5.) But if you’re looking at owing serious money, it’s best to file that extension and pay up.

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