Taxes can be a very time-consuming process. Of course, you want to take your time, and go over everything carefully to avoid any misrepresentations like underreporting your income. Unfortunately, small business owners don’t usually have a lot of time on their hands. However, you don’t want to rush your taxes so just to meet the deadline. If you need more time to prepare your taxes, you have the option to file a tax extension. Here is what you need to know about filing a tax extension.†
Tax Extension Basics
If you arenít able to file your taxes by the tax deadline, you can file a tax extension. A tax extension extends the deadline to file your actual tax return. Under normal circumstances, tax day always falls on or around April 15th. When you file a tax extension, the filing deadline is extended for six months. This gives you until October 15th to prepare and file your tax return.
It is important to note that filing a tax extension does not automatically extend the due date of your tax bill. If you owe money on your taxes, the IRS still wants to be paid on time. If you are unable to pay your tax bill, be sure to set up an installment agreement before your tax bill is due to avoid any fees and penalties. You can do this online on the IRS website.
When to File an Extension
There are several reasons why you may need to file a tax extension. Each taxpayer’s situation is different, so the reasons why you may need to file an extension will vary. Some common reasons why you might need to file a tax extension include:
- You are waiting for important tax documentation. For example: if you never received a 1099 MISC or you lost your W-2 and are waiting on a replacement, it is better to file an extension instead of guessing your income. If a discrepancy is found, the IRS will ask you to revisit it, so you are better off filing an extension to ensure everything is correct.
- You had a life-altering event. Perhaps you or a loved one has fallen ill, this can prove to be a challenging time. There is no need to rush through your tax return. File an extension so you can handle your personal business.†
- You want to take your time and avoid the chaos of tax season. Tax season is a busy time of year. If you have a particularly complex tax situation you may simply want to take more time ensuring that all of your information is accurate. This also allows your tax advisor more time to focus on you.†
- You have schedule conflicts that prevent you from filing on time. Running your business can be really hectic, and your taxes may not be at the forefront of your thoughts. If you’re too busy to think about taxes, you should file an extension. It’s always better to file your taxes correctly the first time.
How to File a Tax Extension
Filing a tax extension is a relatively simple and straightforward process. The best way is to have your tax advisor prepare and file one for you. A tax extension or form 4868 must be prepared and filed on or before the tax deadline, which normally falls on or around April 15th.†
Tax Extension Form 4868
Tax extension form 4868 isnít a complex form. It requires your basic information: name, social security number, address, and your spouse’s information if you file jointly. It will also ask you to estimate your tax liability and provide information on any tax payments you have already made. You can find IRS Form 4868 here.
How to Submit Form 4868
The easiest way to file form 4868 is through e-file. You also have the option to file the form by mailing it in. Again, please remember that filing IRS Form 4868 simply delays the due date for your tax return. If you owe taxes, you still need to pay them on time, or set up an installment agreement with the IRS.
Tax Extension Request Deadline
If you need to file a tax extension, you must do so before the original tax deadline to avoid unnecessary fees and penalties. Tax day normally falls on April 15th, unless the 15th falls on a weekend or holiday, in which case it moves to the next business day.†
2020 Extension Deadline Changes
With everything that has taken place in 2020, the IRS has extended the income tax deadline to July 15th. This also includes the deadline for Q1 estimated tax payments. However, you can still file an extension if you need more time. You have to file the extension on or before July 15th. However, you won’t get a full six months this year. Since the IRS already extended the deadline, a tax extension will only push back the deadline until October 15th.
Answers to Your Tax Extension Questions
Working with a tax advisor is the best way to make sure your taxes are prepared accurately and on time. Sometimes it is in your best interest to wait to file taxes, your tax advisor can help you determine if filing an extension is your best option. To learn more or to schedule a strategy session, contact the tax experts at Shared Economy today. For more tax tips subscribe to our newsletter below.†