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Filing a Tax Extension 101

by on April 5, 2012

By Meghan Stewart

Now that we’ve gone over deductions, exemptions, and credits for your 2011 federal income tax returns, you’re hopefully ready to get those tax forms filled out and in the mail to the IRS by April 17, 2012—the last day to file this year.

Of course, with all the information in the world, sometimes you simply can’t get your taxes ready in time. Rather than face 5 years in jail and hefty fines if you’re charged due to not filing—or even just the 5% penalty for every month you file late— if you don’t think you’re going to be ready, the best solution is to go ahead and get Form 4868. This form lets you apply for an automatic extension of time to file.

You must have the extension filed by April 17, 2012! You can file by mail or use the e-File system.

Filing with the 4868 gives you an automatic extension of around 6 months, which means your taxes aren’t due until October 15, 2012. Don’t wait until the very end though—it’s better to file as soon as you have your taxes ready to avoid more interest added. You will owe interest on any tax not paid by the regular 4/17 due date. This rule has no exceptions—even for traveling U.S. residents who get an automatic 2-month extension to June 15, 2012 for being out of the country on 4/17/2012.

In addition to interest, there may also be a late payment penalty of .05% on any tax funds not paid by April 17, 2012. The maximum penalty is 25%. To avoid late payment penalties, you must have reasonable cause for filing late. Excuses like “I was lazy and procrastinated too long” are not going to convince the IRS to give you an extension. You can attach a statement to your Form 4868 fully explaining your reason for needing more time to file but remember to make sure it’s a logical reason that is backed up.

A note on U.S. residents traveling/living out of the country on 4/17/2012: As mentioned above, if you are traveling or living outside the United States when taxes are due, you are allowed 2 extra months to file your taxes without needing to file a formal extension. You still have to fill out Form 4868, but you do not have to estimate or pay anything, nor do you have to provide a reason beyond your travel to avoid late penalties. You still have to pay the interest, though.

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