Although an extension can be a welcome tax respite, keep in mind that it only gives you more time to file your return. It is not an extension of time to pay any tax you owe. Failure to pay will cause penalty and interest assessments to start accumulating.
There are three ways to file Form 4868:
- Mail in the paper form, which can be downloaded from www.IRS.gov.
- File it electronically. The form is included in most tax software packages, or eligible taxpayers can find it at the IRS' Free File site. Go to www.IRS.gov and type "Free File" in the search box at the top of the page.
- Pay part or all of your tax bill by credit card via an authorized, private-sector service provider.
The IRS has authorized two companies to process credit cards payments:
Both companies charge a convenience fee of 2.5 percent of the payment amount. And if you do not pay your full tax due, penalties and interest will accrue on the unpaid balance.
More filing deadlines for someApril 15, or the following business day if the 15th falls on a weekend or federal holiday, is a double deadline for some taxpayers. The mid-April date also is the due date for the year's first estimated tax payment.
U.S. taxes are collected on a pay-as-you-earn system, with the bulk of them paid by payroll withholding from employee wages. But when you are self-employed or have income, such as investment earnings from which no taxes are withheld, you must make the payments yourself as estimated payments. If you do not pay enough throughout the year, either via withholding, estimated payments or a combination of both, you could face an underpayment penalty.
To avoid this, Form 1040-ES, which includes instructions and payment vouchers, helps you calculate your untaxed income and figure your bill. The IRS prefers you take that total estimated amount, divide it by four, and send in equal payments on April 15, June 15, Sept. 15 and Jan. 15 of the following year. Again, holidays or weekends will push these deadlines to the next business day.
You can make each payment by sending the appropriate paper 1040-ES voucher, downloadable from www.IRS.gov; paying by credit card; having the funds electronically withdrawn from your bank account; or paying via the IRS's Electronic Federal Payment System, or EFTPS, at www.EFTPS.gov.
Figure your estimated payments carefully because underpayment penalties also are assessed on each payment period if too little is remitted. If your income that is not subject to withholding is unequal throughout the year, you can avoid such penalties by using the annualized method. Using Form 2210, figure each 1040-ES payment period separately and pay the appropriate tax for each. This is particularly useful if your job is one where you earn most of your income in one period, such as a lawn service with key earnings during the summer, because you then will have the cash to pay the taxes.
For more tax-filing information and tips, check out Bankrate's Tax Guide