We all know the costly consequences of failing to file taxes by April 15th each year. Avoid the compound interest and reduce the late tax filing penalty by filing for a tax extension for free. If you have been punctual at filing taxes every year but know you won’t be able to file them before the due date you can get a tax extension online in 3 easy steps. Before considering this option, there are some things you should note (and remember):
The extension does not apply if you owe money. This means you will send an estimated payment instead of an exact one by the tax deadline.
You will be paying late payment penalties even when you get a tax extension. This penalty will be much smaller than the 5% compound daily interest.
You can only apply for a tax extension before April 15th or before the tax filing due date.
Step #1 – Estimate Your Tax Amount
While you don’t have to sit for a few hours to file your taxes, you will still need to calculate an estimate. Don’t worry! It won’t take much time or cost you any money.
You can use any tax software for this step. Various online tax services offer free service of tax extensions. You can also calculate your estimated tax manually.
Estimated taxes are submitted alongside the tax extension application. You must also submit a 90% payment of this estimated amount to avoid getting charged the late payment penalty fee or interest on the amount you owe.
Step #2 – Fill Out Tax Form 4868
You must complete the tax extension form or form 4868 from IRS. It is the request form for a tax extension. You can download the form through the IRS website for free.
It is also free on tax software by tax companies and tax filing apps. The form requires details calculated in the first step, i.e., the estimated tax amount and its 90% payment.
Step #3 – File the Form and Pay the Estimated Amount
File form 4868 through the tax software you use and pay the amount directly through the online banking service. Don’t forget to save a digital or printed copy of the form and the payment receipt for your records.
That’s it! You will get up to 6 months extension to file your taxes. Filing a tax extension can help you save at least a couple hundred dollars in a penalty fee.
Don’t forget that you will still have to pay the penalty for late filing and a small but gradually growing interest amount. Make time for filing taxes as soon as your schedule allows, even after filing for the tax extension.
You may also qualify for a tax extension without filing for it if you are a deployed member of the military, people affected by natural disasters, or work abroad. The IRS will grant you 90 to 180 days of extension in these situations.