Have you ever met a person that makes things more complicated than what they really are? You know, the ten year associate degree guy? Or perhaps the slightly more elderly fella you work with that rings up IT to help them restart their computer?
I’m sure the answer to the question above is “yes”.
Now, I want you to think of that person as well as the millions of others that are probably just like them in the world, and imagine they were one single human being; the antithesis of productivity or the epitome of dysfunction.
That imagined person actually has a name. Their initials are I.R.S., which stands for the Internal Revenue Service.
If you ever feel that your life is completely in order and you want to throw a wrench at it...read a piece of instructional material ever published by the IRS. Not kidding, the material is so frustrating to understand, you'll want to rip your hair out!
After decades of practice, they still struggle to communicate to taxpayers, like you and I, how to do things like file your taxes, or in this case, how to file a tax extension. I guess I should be grateful though, because without their complete inability to simplify things, I would most likely be out of a job right now. So in a weird way, thank you IRS.
When anyone mentions anything related to taxes I know that your brain automatically thinks that it must be really confusing. I have great news for you though. Filing an extension is actually EASY. Yes, you heard me. Honestly, when it comes to taxes, this is probably the easiest thing that can be done. So, let’s get to it.
Sometimes, after you add up how much taxes you owe, you realize need more time to pay. A tax filing extension gives you six extra months to organize your books and get the money you need to finance your owed taxes. I’m going to give you a very simple walkthrough and start by showing you an example. I'll Include a picture of what the extension voucher looks like below.
The form is called Form 4868 and is literally just a voucher. This can be submitted either by mail or electronically. Either way, it is fairly simple to do. As you can see the left side of the voucher is general information about yourself. After filling all of that in, we get to the juicy section on the right side. In Part II, lines 4-7, it asks you to do a little calculation. Let’s go through these line by line.
Now that you know how to fill out that part of the extension form, I’m going to let you in on a little secret. If you are lazy and like to get things done in the quickest and most efficient way possible, then I suggest you do the following. Submit a “$0 extension”. If you just want to extend the amount of time that you have to file your tax return you can fill out Part II with all 0’s and the IRS will be just fine with that. You aren’t required to put a calculation on this form to file it. Another option is to put 0’s on lines four through six and on line seven you can put an amount for however much you want to pay. Either of these ways work in the eyes of the IRS.
WARNING: I want to make it very clear to all freelancers that filing an extension ONLY means you have six more months before you have to file your tax return. It DOES NOT give you six more months to pay the tax that you owe. So, if you want to avoid any interest and penalties...
I suggest you pay your taxes in full before April 15th. Then you have until October 15th before you have to file your tax return.
Simply, your penalty will be a lot higher - around 5% of your tax payment per month. So if you wait until October to file taxes where you owed $2,000, you will owe $2,600.
Remember - you can, and should, looks for creative ways to reduce how much you'll owe, such as remembering to claim these 25 most commonly missed tax write offs.
Almost all e-file providers offer free filing for tax extensions. I will tell you that whatever service you choose to file an extension with, will most likely force you to make an account. This will automatically include you on the weekly email blasts to get you to file your tax return with them. Most e-file providers make it pretty easy. They will most likely just ask you the same questions we went over above and e-file it for you. All in all, the process should only take a couple of minutes. If this is something you have been scared of doing, you ease up a little because it is an easy process!
It takes 5 minutes and you can do it online here.
So there you have it. That is the crazy difficult process of filing an extension. Filing an extension for a business follows the same guidelines as well. If you have any questions I encourage you to reach out to a tax professional to answer your specific questions.
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