As you are probably aware, your taxes are due today. Tax Day came a bit late thanks to a Washington D.C. holiday, and the 15th being on a Sunday.
Don’t forget if you are little bit behind that you can get a free, no-questions asked, automatic extension to file your taxes just by filling out Form 4868. All of the major tax preparation software packages offer a way to file an extension through them electronically, as well.
Form 4868 works just like your 1040 Form. It is due on Tax Day (today) by midnight, so mail it (and get it postmarked) or file it electronically.
Note that the 4868 extension does NOT give you more time to pay. Your money is still due on April 17.
You aren’t alone. The reality works a little like this:
If you are doing your taxes now, and it looks like you are going to owe the IRS money, then send money with your 1040 Form. How much should you send? Whatever your best guess is, but it is much better to overpay than underpay. If you overpay, you’ll get the money back as a refund. If you underpay, you will owe the difference plus interest and penalties. Remember the IRS cannot except a single check for an amount greater than $100,000,000. If you need to send more than $100 million, you’ll need to send multiple checks. (I know, no one reading this owes that much, but a little humor can help when it comes to doing taxes.)
Which brings us to the next point. If it looks like you are going to owe money on your taxes (or even if it looks like you MIGHT owe money on your taxes), then finish them as quickly as possible. If you file an extension, then your taxes are due on October 15. But, even though they aren’t due until then, if you may owe, finish them right away. If you were wrong on your calculations and you owe more than you think you are going to, your penalties and interest are time based. In other words, you owe more interest for four months, than for three months.
What is the point of filing an extension if you still have to pay?
The extension prevents you from having to pay the late filing fee. The penalty for filing taxes late is generally 5% of the amount due, for EVERY MONTH it is due, with a minimum of $210 if you are more than 60 days late.
So, file the extension.
If you don’t owe money, or are sure you are getting a refund, then this is even smoother. Just file the extension, don’t send any money, and when you finally get your taxes finished, they’ll send you the refund you are due. Unlike you, however, the IRS will not pay interest, so if you are getting a refund, it is still in your best interest to file as quickly as possible.