- Personal Finance
2009 Individual Tax Returns: Extensions
Still No Relation
How time flies. It seems like only yesterday that we were wrapping up 2009, getting all our tax documents together and preparing to start a new and exciting year. How quickly the tax deadline comes, only 5 short weeks to the dreaded April 15 deadline. Are you ready? Made all your IRA contributions? Gathered all your W-2 and 1099's? No? Then maybe you should consider filing an extension.
Each year, millions of Americans file a personal extension for their income taxes, when for one reason or another, they know they just aren't going to get it done. The process is simple, but you should make sure you dot your i's and cross your t's or you;ll be getting a nasty, nasty note from our brothers and sisters at the IRS? So what are some of the important points to successful filing? The most important is probably, "What form do I use?" and the answer, for individual filers, is the 4868.But you don't have to use a paper form. Through the IRS Free File program, you can file the form online at no charge. And if you have a personal preparer, or use home software to file, they can also file the form for you and have your payment charged to your credit card.
The next thing to know is the deadline. It's easy to remember: April 15, same as the filing date for your 1040, though you'd be well advised not to wait until then. And what will you get in exchange? Six more months from the normal filing deadline in which to file your tax return, though you should know that if you are requesting an extension because your out of the country, you only get four months. For the typical taxpayer, using a regular calendar year, that makes the new deadline October 15, 2010, or August 15, if your out of town.
So what's the problem? Why shouldn't everyone do this? After all you take 10 minutes to fill out the form (you can even do it online!) and in exchange you get 6 more months to pay your taxes! Well, know, that's where people get it wrong. What you are really getting is an extension for filing the paperwork. You still have to estimate the amount of tax you expect to owe and send in payment. And the Service really encourages you to send at least part of the payment when you file your extension. Otherwise, the government will charge you interest for each day you fail to pay after the regular filing date, even if you file the extension! Even if you get the payment in by October 15, the end of the extension, you still have to pay the interest that's accrued.
And what if your estimate is wrong? Then you can be stuck paying penalties and fines in addition to the interest! And if the IRS feels your reason for the extension isn't good enough? That's right, more fees. While many people do file the extension, and often they have very good reasons for it, you really are better off filing on time, and paying your tax up-front. It can be cheaper in the long run.