by Lisa Morris
If you're thinking about filing for an extension on your 2010 income tax return, there's a lot you need to know. The process is simple, but the details are numerous. First, weigh out the pros and cons of filing for a tax extension.
The Advantages and Disadvantages
Pros
- It's easy, it's free, and you don't need to give the IRS an explanation.
- You gain six months to prepare your tax return.
- You free up time for social networking, watching baseball, playing golf or anything else you want to do between now and October 15th.
- The tax extension form is one of the easiest IRS tax forms to fill out. It only takes about 10 minutes to complete and you don’t need much information.
Cons
- You're only delaying the inevitable if you owe taxes. If you owe the IRS every year and always have trouble paying your taxes on time you'd be wise to use the IRS tax calculator to avoid having too little withheld from your paycheck.
- If you're expecting a refund, you are giving the government an interest-free loan.
- If you're filing for a tax extension because you just hate filling out your tax return, you're only prolonging the pain and suffering.
How to File
- You can e-file Form 4868 on your home computer or have a tax professional do it for you. The deadline for filing an extension this year is April 18th, 2011 (the IRS extended the deadline because April 15th is a holiday).
- You can file a paper Form 4868.
- You can pay all or part of your estimated tax due by phone or online before April 18th. Your payment must be at least $1..
If you're out of the country on April 18th, you don't have to file for a tax extension. The IRS allows you an extra two months to file your return.
Filing for a tax extension only extends the time you have to file your return, not the time you have to pay any taxes you owe. If you don't pay your estimated tax due by April 18th, you'll owe interest and may face a penalty. The tax extension gives you until October 15th to file your return and pay any remainder of your taxes, plus interest and penalty.
If you think you will owe tax, you must estimate your tax liability and put it on Form 4868. You can estimate your tax with an online tax estimator such as TaxCaster from TurboTax. If you're eventually going to e-file your return, save time by estimating your tax with an online tax service such as H&R Block. Just fill out your tax return, save it, and use the amount of tax due to file for the tax extension. You won't get charged for the service until you file your saved return.
You can avoid a penalty by paying at least 90 percent of your estimated tax due by April 18th. The penalty is usually 1/2 percent for each month you're late on any tax not paid by April 18th. You'll also owe accrued interest from April 18th on the unpaid tax.
Lisa Morris is a freelance writer and experienced tax preparer who has never had to file for an extension.
Copyright 2010, Sears Brands, LLC. All Rights Reserved.