You already got an extra three days this year to file your taxes — the final deadline is April 18 instead of the traditional April 15 due to the celebration of Emancipation Day in Washington, D.C. But if that wasn’t enough time, you can still file for an extension on your 2016 tax return.
The good news for those needing an extension is that you don’t have to pay a tax pro or tax prep service to get one. Everyone can use free e-file services listed on the IRS website to file an extension form at no cost.
The bad news is that even though you’ve filed for an extension, it doesn’t mean you still don’t owe money to the IRS on April 18. That’s right — if you owe money to the government and don’t pay by April 18, you’ll face a late payment penalty from the IRS that’s generally .5%-1% of total tax owed for each month or part of the month after the April 18 deadline, up to 25% of tax owed. You can avoid some or all of the late payment penalty by using your extension form to pay an estimate of what you’ll owe.
Here’s what you should do if you want to file for a tax extension, for each type of filer.
If You’re Single
Form 4868 is what individual taxpayers should use to ask the IRS for an extension. It’s a short form, and the IRS includes directions explaining how to fill it out and estimate your tax burden for the year. This can help you estimate payments and make one to avoid larger late payment penalties, if you’re concerned about that.
If You’re Filing Jointly
The same form — Form 4868 — should be used to file for a tax extension if you’re filing jointly with your spouse too.
If You’re Out of the Country
If you’re a U.S. citizen who is out of the country on April 18, you automatically are granted a two-month filing extension — you don’t have to request one. If you need more than two months, however, you’ll need to file to request an extension using Form 4868. There are specific requirements that you must meet to be considered “out of the country” however, so you should visit the IRS website for more information or consult a tax pro. Publication 54 from the IRS has more specifics on filing while abroad too.
If You’re a Business Owner
Hopefully, as a small business owner, you have a tax pro helping you with your bookkeeping and accounting who can help you either get your forms together in time to file or can help you walk through the extension process. If you don’t have an Enrolled Agent or CPA assisting you, though, you can file for an extension on your own. It all boils down to how your business is structured and what your personal tax liability is.
If you’re a self-employed business owner, Form 4868 is still your go-to tax form for requesting an extension.
If you’re an owner or part of a Limited Liability Company, S Corporation or C Corporation, it’s best to consult with a tax professional to determine which forms you need to file. There are some intricacies and special circumstances that may determine whether you use special forms like Form 7004 instead of Form 4868.
The major thing you want to avoid is a tax lien on your business. Not only will liens cost you money and leave you with a headache in dealing with the IRS, liens can damage your business credit scores, depending on how the lien is filed. (You can see where your business credit stands for free on Nav.) If your paperwork isn’t together and you feel like you need to delay in order to make sure you aren’t audited or found to have underpaid, file the extension and talk to that tax pro asap.
If You Owe Money (or Are Pretty Sure You Will)
Paying your estimated tax burden from Form 4868 can help you avoid late payment penalties down the road. If you’re really unsure how much you’ll owe, or just don’t have the cash to pay the tax bill, you still have options. Ideally, you should get with your accountant or tax pro and file as soon as you possibly can. Because of how late payment penalties are calculated, time after filing data is of the essence, even if your extension gives you until Oct. 16, 2017 — that will apply to most tax filers, but not all — to file. If you know you owe and just don’t have the cash, you may also want to consider filing your tax return as usual and working out a payment plan with the IRS. It likely will cost less than incurring late payment penalties.
If You Think You’re Owed a Refund
Getting an extension when you’re owed isn’t very common, since most filers want to get the money Uncle Sam owes them as quick as possible and file early in the tax season to speed up that process. However, you can still file Form 4868 if you need an extension, but don’t expect the government to pay you extra for the interest-free loan you’re giving it.
More Tax Help
Editor’s note: This story was updated April 25, 2018 to reflect the fact that tax liens will no longer be reported on personal credit reports.