It is officially tax day, April 15th. Even though the date is pretty well known, it somehow sneaks up on many of us, as we find ourselves having one weekend between now and the day we need to submit our return. Maybe you had plans this weekend. Maybe you’re still gathering up your receipts and 1099s. Either way, whatever your reason, it’s time to understand how to get a six month extension to file your return.
It’s a simple matter to file Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) and along with it be sure to pay most of what you anticipate being due. You can file a Federal extension easily with TurboTax and state extension using forms within TurboTax. To be specific, if you owe the greater of 10 percent of your final tax liability or $1000 you will be hit with a penalty in addition to interest on the amount owed. If you’ve paid at least this amount, you will only be charged interest on the remaining amount due. Currently, the interest is a reasonable 4 percent per year.
Another “perk” of filing for an extension is that you also get the additional six months to re-characterize any IRA money you converted from a traditional IRA to a Roth IRA account in 2009. If you misjudged your marginal tax bracket the re-characterization may reduce your tax bill enough to cancel off any penalties you might have had. Also, if the stock or fund you converted has fallen in value, it may benefit you to move it back to the original IRA. One of the few times you have the chance to call for a financial “do-over.”
If you are finished filling out your return, and it’s just a matter of not having the funds to pay the tax due, file anyway. Include Form 9465 (Installment agreement request) and let the IRS know how much per month you are able to pay. You are allowed to spread payments over as long as three years, along with the promise that your tax payments during these years will not fall behind your obligations.
Most important, don’t look at this as a failure on your part. Take this experience as an opportunity to learn and better plan for next year.