There is only a little over 3 weeks left before your 2012 tax return is due. (We’re back to April 15th this year.) So what if you can’t get your return done in time to file by then? You can file an extension. It can be done electronically or by filing a paper Form 4868 by April 15th. And it does have to be postmarked or electronically filed by April 15th. After that time, the extension won’t help you.
As the tax filing deadlines approach, I get calls from clients wanting me to file an extension for them. It’s easy to do electronically; set up a file and send. I don’t need signatures. What I do need is to know about what the client is going to owe so that they can pre-pay that.
The IRS gives individuals an automatic 6 months to file a return. The due date for 2012 tax returns is October 15, 2013. Of course; you can always file the return before that. BUT! An extension is not a delay in paying. It just means you want more time to get all your info together to file a complete return. If you know you will be getting a refund, you really don’t have to file an extension. The extension gives you protection against the failure to file penalty if you make a good faith effort to pay what you think you will owe. Underestimate your final tax and balance due too much and the IRS says they could add the failure to file penalty back. But if you send them too much now, you will get that back as a refund when you do file.
I just said that if you are getting a refund, you don’t need to file an extension but you should if you want to protect the right to elect a special tax treatment. Many elections must be filed with a timely filed tax return and that could include extended returns. For example, a net operating loss is generally carried back to prior years (the number depends on the IRC at that time). But you can elect to just carry the loss forward. But the statement must be filed with the return by April 15th unless you file an extension on time. Then you keep the option available until the return is filed.
What to do? If your return is done and you just can’t pay the balance due, file the return. You can work out a payment arrangement. If you need more time to get all your paperwork together, estimate your taxes and pay that with an extension. If you’re sure you’re getting a refund, you don’t need an extension unless you want to protect a special election. File an extension if you owe (or as a protection if the estimate is close) and send them what you think you will owe. You can always file the extension but not pay anything but you have to be prepared for a notice wanting interest and penalties for not pre-paying your tax.
And don’t forget to check how your state handles extensions. Some will take the federal extension, while others have their own form to complete.