For the 2016 tax season, the deadline to submit your tax return is April 18, 2017. This is a couple days later than the usual deadline of April 15, which happens to fall on a holiday weekend this year, resulting in the extended deadline.
However, what if that’s not enough time? What if you’re out of the country or have other reasons — such as illness, moving, or a death in the family — that prevent you from having the time necessary to properly do your taxes by April 18?
U.S. Citizens Who Live Outside the U.S.
If you live outside the U.S., you get two additional months past the normal April due date to file your taxes, in which case you will not need to file a tax extension. To qualify, you must either live outside the U.S. with your main place of work also being outside the U.S., or you must be an active member of the U.S. military. But if you wait until after the normal deadline to pay your taxes, you will be charged interest on what you owe beginning April 18 until the date when you pay.
Automatic Tax Extension
Fortunately, the IRS allows taxpayers to file for extensions for turning in their tax returns. Using Form 4868, you can file for an automatic extension of up to six months. The automatic extension is granted to any taxpayer who requests it, but it must be turned in by the date taxes are due — April 18, 2017, for the 2016 tax year. However, you’re still required to pay your taxes by April 18, or you risk incurring interest and penalties.
But Wait: You Still Have to Pay Your Taxes On Time
Since filing an extension does not get you off the hook for paying your taxes in April, be sure to fill in Form 4868, which includes a worksheet so you can roughly estimate how much tax you expect to owe. It is not required that you pay that amount when you file for an extension, but you will incur penalties and accrue interest on the total taxes you owe if you choose to wait and pay later.
If you wait to pay your taxes, you will be charged interest on the taxes you owe, even if you qualify for the two-month extension because you live outside the country. Interest will be charged from the April due date until the date you pay your taxes, regardless of whether you have a good reason for not paying on time.
Late Payment Penalty
Late payment penalties are also levied against your tax liability after the April deadline, even if you’ve applied for the extension. For every month or partial month you have not paid your taxes, you will be charged .5 percent of any taxes you owe, up to a maximum of 25 percent. However, the late payment penalty may be waived if you can prove you have a good reason for not paying on time. To do so, be sure to attach a statement to your tax return that outlines why you could not file your taxes on time.
Late Filing Penalty
Even if you file a tax extension, you may incur a late filing penalty. Late filing penalties are 5 percent of the total tax due for each month or partial month that you have not paid after April 18. The maximum charge is 25 percent.
If you file your return more than 60 days late, you will be charged $205 or the total tax you owe, whichever is smaller. However, you may be able to avoid this penalty if you have legitimate reasons for filing late. When you file your tax return, include a statement that outlines what happened, and the IRS will evaluate your case.
What If I Get a Refund?
What if you don’t owe taxes at all and are due a refund? In that case, it’s in your best interest to file your taxes as soon as you can. If you haven’t filed your tax return within three years of the year you qualify for a refund, you lose the refund.
Although it’s easy in theory to apply for an automatic extension of filing your tax return, it’s important to think twice about if you really want to wait before actually paying the taxes you owe. Filing a tax extension may provide you with more time, but it might also cost you more money in the long run. If you have a legitimate reason, the extension will be a welcome option. However, if you’re simply looking to delay the inevitable, you could end up paying more.
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