Photo by david.ian.roberts on Flickr.com
Are you late filing your taxes this year? You’re not alone. It seems that many people are behind.
It’s important to know that an extension gives you an extension of time to file your tax return; it’s not an extension of time to pay your taxes. I think a lot of people want to file extensions because they owe and they think it will give them more time to pay. It doesn’t.
The penalty for paying late is ½ of 1% per month. So, let’s say that you owe $10,000 on your taxes. You file an extension, but don’t pay anything towards what you owe. When you actually file and pay in October, instead of owing $1000, you’re going to owe an extra $300. (.005 times $10,000 times 6 months = 300)
No matter what, if you’re not ready to file your taxes before April 15th, do file an extension. Although the late payment penalty is ½ of 1% per month, the penalty for not filing (or filing an extension) is 5% per month. That’s ten times as much as the late payment penalty. You don’t want to have to pay that.
If you need to file an extension—that is, ask for more time to file your taxes, here are three ways to do it:
1. File electronically, using tax software. If you don’t have tax software already, you can use the 1040.com software on this website. Here’s a link: Do Your Own Taxes
2. You can mail in a paper copy of the extension form. It’s called a 4868. Here’s a link: IRS Extension Form
3. You can make a payment towards your taxes with a credit or a debit card. And that will give you an automatic extension for your taxes. If you just want to make a payment, it’s pretty easy. You’ll start at the IRS website, and chose your payment provider from there. Here’s the link: IRS Direct Pay
So if you can’t get those taxes done before filing time, do get that extension filed. If you owe the IRS, it could save you some money!