Hello there, I hate to be the bearer of bad news; Tax Day is just around the corner. The Tax Deadline for your 2021 tax filing is April 18th, 2022.
Don’t freak out. If you find yourself unable or unwilling to get your taxes done by that deadline, you can request an automatic six-month extension to file. In case you were wondering, the deadline to apply for a tax extension also falls on April 18th.
The good news here for all you procrastinators (of people with complicated tax planning needs) is that applying for a tax-filing extension could be one of the easiest parts of getting your taxes done. Reminder- you must file for an extension. You are not automatically given more time.
There is no shame in filing for a tax extension. I’m guessing some of you procrastinate and will wait until the night before or the day of to file regardless of when your tax filing deadline is. As a financial planner who does a ton of proactive tax planning, I work with many clients who own businesses and have more complicated tax situations. Even when everything is organized and given to their tax experts early- they still often end up filing on an extension.
The reality is, that the more complex your taxes are likely to be, the more likely you are to need a tax extension. You may still be waiting on tax forms like 1099s or k-1s. For those who own businesses or are self-employed, you may be filing tax returns for your business as well as yourself as an individual. The good news is this also brings with it many more opportunities for proactive tax planning. Not to mention tax-saving retirement plans like Solo 401(k)s or even Cash Balance Pension Plans.
What Does a Tax Filing Extension Mean?
It is important to note here that an extension only applies to an additional time frame to file your taxes. You will still need to pay any taxes owed to the government by April 18th. If you are unable to pay your taxes in full, the IRS may be willing to offer a payment plan.
How You Can Easily File For a Tax Extension.
You simply head over to the IRS website and fill out IRS for 4868. You can access this form directly at this link. You can do this filing yourself, and it is free. If you are working with a paid tax preparer or CPA, they will likely take care of this for you, but make sure to confirm it has been filed. Form 4868 will only apply to your federal tax extension. Many states will also require you to file for an extension directly with them. I won’t be listing the requirement of each state, so take a second and check with your state tax authority to see what form they need to file an extension, if any.
For all the do-it-yourself tax preparers out there, tax software like Turbo Tax should have an option to file for an extension within their tax filing software. If you are in the middle of filing with them, this may be an easier way to file for a tax extension. If not, you can simply use the IRS form listed above.
You will have to answer a few short questions to file for an extension. The big ones are Estimated taxes owed. As well as the approximate amount of taxes paid already. Beyond that, receiving a tax extension is basically an automatic process. You will not be required to provide an excuse to file late. Assuming you fill in the form completely and properly, your tax extension filing will be granted. With a tax extension, you will have an extra six months to file. Meaning your new tax deadline will be October 18th, 2022, to file your 2021 taxes. Please, pretty please, don’t procrastinate again until October 17th to begin filing. The later you file, the more likely you are to make costly tax mistakes.
What Happens If You Don’t File For a Tax Extension?
The IRS likes to pile on penalties and interest to taxpayers who don’t meet their deadlines. The late filing penalty is 5% per month on any unpaid taxes. This caps out at 25% of unpaid taxes. For those who do file on time but just say forget to pay on time, you will get slapped with a failure to pay a penalty of 0.5% of unpaid taxes per month. This will continue until you are up to date.