How To File A Tax Extension

How to File a Tax Extension

Clocks have changed, days are getting longer, and spring is here. That means the official tax filing deadline, April 18, 2023, is at hand. But getting your taxes done on time may be leaving you completely stressed and overwhelmed.

Whether you still need to get your finances in order or your plan to file on time has been sidetracked by unforeseen circumstances, you can request a six-month filing extension from the IRS.

Here’s what you need to know about filing an extension for your 2022 taxes.

You Need To Fill Out A Federal Extension Form 4868

To move your tax filing due date to Oct. 15, 2023 you need to complete IRS Form 4868. The form needs to be completed on or before April 18, 2023. Keep in mind that you must still pay what is owed to the IRS by this April deadline. An extension does not mean you can also delay what needs to be paid. 

You need to submit Form 4868 to avoid failure-to-file penalties that can add up to 25% to your tax bill.

When you file a tax extension you receive an extra six-months to file your Federal Taxes. This is an extension to file your return, not an extension to pay your taxes

You can fill out a paper form and mail it to the appropriate IRS location (which varies by state) or e-file it using the IRS online fillable forms or tax software like TurboTax, FreeTaxUSA, TaxAct, TaxSlayer, or H&R Block

Here are the links that go directly to the extension pages of popular tax software:

Form 4868: File A U.S. Tax Extension

The form, pictured above, is deceptively complex. With just nine fields, it looks like it should take mere minutes to complete. You start by filling out your name, address, and Social Security Number.

Then you get to field 4, which requires you to estimate your total tax liability for 2022. Most people who know their tax burden don’t need to file an extension.

Estimating your tax burden is the most difficult part of filing an extension. If you’re looking for guidance on how to estimate your tax burden, you won’t find it with the IRS, which tells filers to “properly estimate your tax burden using the information available to you.” 

When you estimate your tax burden, you want to be as accurate as possible. Certain tax software companies that allow you to e-file an extension have built-in calculators to help you estimate your taxes.

Tax Tip: The TurboTax Calculator is an especially helpful tool that will work for most filers seeking an extension. 

If you’re really struggling with estimating your income, you may want to spend a couple of hours using the best tax software to get a more thorough estimate of your business or rental income.

The remaining fields include a total of 2022 Federal Tax Payments, the balance due (if you owe more taxes), and the amount you’re paying at the time of filing an extension.

File A Tax Extension For Your State

If you live in a state that requires a state income tax, you may need to file an extension in your state. The process for requesting an extension varies by state. Some states automatically grant a six to seven month extension when the IRS grants one to you. 

Other states require you to request an extension using their process. When you use tax software to request a Federal extension, you will see the option to request a state extension as well. 

If you’re not using tax software, you can also use an online search to figure out the process for requesting an extension in your state.

You Still Have To Pay Your Taxes By April 18

The extension to file is not an extension to pay your taxes. You should pay unpaid taxes at the time you request an extension. If you can’t pay the amount in full, pay as much as you can. Filing a tax extension doesn’t absolve you from paying your taxes on time and in full. 

The interest rates for overdue taxes range from 3% to 6% for 2022. If you have the cash to pay off back taxes, take care of the debt right away. This way you can avoid paying even more in interest over time.

If you dramatically underpaid your taxes (less than 90% of what you actually owed), you may owe a tax penalty which can range from 5% to 25% of your unpaid tax burden. 

Make sure to prioritize paying your taxes before April 18, even if you can’t complete your filing by the original tax deadline.

Don’t Expect A Refund Until You’ve Filed

If you overpaid your taxes for 2022, you will be paid a refund. But that refund won’t come just because you filed Form 4868. 

You won’t see a refund check until you complete your real tax return. You can expect to see a small amount of interest on the cash the IRS holds for you, but make sure you put your tax refund to work once you get your money back from the IRS.

Editor: Claire Tak Reviewed by: Robert Farrington

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