There are times that, no matter how hard you try, you just can't get your taxes filed on time. You may need to go beyond the April 15 deadline to get your taxes in order. If that's the case, then you will need to file for an extension.
Below are five things you should know about extensions:
It is important to remember that an extension is an extension to file your taxes...not an extension to pay them. You still must pay your taxes by April 15. Otherwise, if you owe the IRS money, you may be liable for penalties and interest on the amount you owe.
You can qualify for a "no-questions-asked" 4-month extension to file your Form 1040 (your individual tax return). IRS Form 4868, "Application for Automatic Extension of Time To File U.S. Individual Income Tax Return", grants you an automatic extension of 4 months to file your return. You do not need any explanation, reason or excuse to qualify for this extension.
If you need even more time, you can receive an additional 4-month extension via IRS Form 2688 "Application for Additional Extension of Time to File U.S. Individual Income Tax Return". However, there's a hitch -- this application must be approved by the IRS, so you will need a valid reason. Many accountants and tax experts recommend something like "We require additional time because we are waiting for tax information that is needed to prepare our return properly."
If you file a corporate tax return, you can receive a single 6-month extension to file. You can apply using IRS Form 7004. If you receive an extension for your corporate return, you don't necessarily have to get one for your personal return as well. However, doing so may give you or your tax preparer additional flexibility and options.
An extension can provide you with extra time to shelter money in a retirement account. You can open and contribute to a SEP (Simplified Employee Pension) up until the day you file your return, including any extensions. Similarly, you can contribute to a Keogh account up until your extended filing date, although it must be set up before December 31.
