How to easily request a tax return extension in 2020
As if anyone needs more bad news during the coronavirus pandemic, Tax Day 2020 is fast approaching. The tax deadline for your 2019 tax return is July 15e, 2020. If you are reading this, I guess you are generally expecting the absolute last moment to declare your taxes.
For those of you who cannot or do not want to do your taxes before this deadline, you can request an extension of the file. In case you were wondering, the deadline to apply for a tax extension also falls on July 15.e. The good news here is that applying for a tax extension could be one of the more manageable parts of the tax filing process.
There is no shame in asking for a tax extension. I’d rather see you asking for an extension than making a mistake on your taxes that could lead to an audit. I still guess some of you are going to procrastinate and wait until the day before or the tax deadline day to file, regardless of whatever is going on in the world. With this in mind, I work with many clients who own businesses and have more complicated tax situations. Even when you are organized and given your all to your tax experts in the beginning, you will often end up filing a tax extension request.
In fact, the more complex your financial situation, the more likely you are to need a tax extension. This year in particular, many business owners may struggle to pay their 2019 taxes. With the late filing, most people should have received all of their tax forms. In a typical year, many people have to wait for tax forms like a k-1. For those who own a business or are self-employed, you can file income tax returns for your business as well as for yourself as an individual. The good news is that it also brings plenty of other proactive tax planning opportunities, not to mention tax-saving pension plans like Solo 401 (k) or even cash balance pension plans. There is still time to open and fund a SEP IRA, Roth IRA or Traditional IRA for 2019.
What does a tax extension mean in 2020?
It is important to note that an extension only applies to an additional time to declare your taxes. You will still have to pay the taxes owed to the government by July 15e. If you are unable to pay all of your taxes, the IRS may be willing to offer a payment plan.
You can optionally also pay with a credit card. We go deeper when it’s a good idea in this article, also for Forbes.com. As a fiduciary financial planner, if you don’t have the money to pay now, using a credit card to pay your taxes probably isn’t going to be a good idea. There are times when this can make sense, like when you’re trying to hit a spending threshold for a credit card signup bonus.
Here’s how you can easily apply for a tax extension.
All you need to do is go to the IRS website and fill out IRS Form 4868. You can go directly to this form. from this link. You can make this deposit yourself, and it’s free. If you are working with a paid tax preparer or CPA, this person will likely take care of this for you, but be sure to confirm that it has been filed. Form 4868 will only apply to your federal tax extension. Many states will also require you to file an extension request directly with the state. I’m not going to list each state’s requirements, so take a second and check with your state’s tax office to see what form, if any, is needed to file an extension.
For stand-alone tax preparers, tax software, like Turbo Tax, should have the ability to request an extension in the tax return software. If you are in the process of filing a claim with them, it may be an easier way to apply for a tax extension. Otherwise, you can just use the IRS form above.
You will need to answer a few short questions to request an extension. The most important are the estimated taxes owed, as well as the approximate amount of taxes already paid. Beyond that, receiving a tax extension is basically an automatic process. You will not be required to provide an excuse for filing late. Assuming you complete the form completely and correctly, your tax extension request will be granted. With a tax extension, you will have additional months to file your return. This means that your new tax deadline will be October 15th.e, 2020, to file your 2019 taxes. Please, please don’t procrastinate until October 14e to start filing taxes from last year. The later you submit, the more likely you are to make costly tax mistakes.
What happens when you do not file a tax extension request?
The IRS likes to rack up penalties and interest for taxpayers who fail to meet its tax filing deadlines. The late filing penalty is 5%, per month, on any unpaid tax. This caps at 25% of unpaid taxes. For those who produce on time, but may forget to pay on time, you’ll be slapped with a non-payment penalty of 0.5% of unpaid taxes, per month. This will continue until you are up to date. Getting these penalties imposed is just a big waste of money.