Filing an extension on your taxes will buy you time to get your return in order this year, but you still need to make sure your taxes are paid by April 15. Below we’ll discuss the pros and cons of filing for a tax extension. For your convenience, the links below will take you directly to a specific section.

Extra Time: Should I File an Extension on my Taxes?

Is a Tax Extension Right for You?

How to File for a Tax Extension

How to Pay Estimated Taxes

Listerhill Is Here to Help

Read on to learn how a personal tax extension works and whether it’s the right choice for you.

Extra Time: Should I File an Extension on my Taxes?

If you’re scrambling to find pay slips, receipts, or other documents in time for tax day on April 15, take a breath. Filing for an extension can give you the space you need to get your return right.

The extension option is open to all taxpayers, regardless of your income or tax status, and filing for one is free. You just need to make sure you submit your request for an extension by April 15.

When is the due date for taxes that have been granted an extension? Filing for an extension gives you another six months, until October 15, to complete your return. Remember, however, that filing an extension does not mean that you don’t have to pay any taxes until October 15. You still need to estimate and pay at least some of your taxes by April 15.

Is there a penalty for filing an extension? No—provided you make a partial payment of what you owe by April 15. You can also opt to make partial payments throughout the year. But be aware that underpayment can result in penalties or interest fees on the outstanding amounts.

This blanket tax extension is also separate from the special extensions that the Internal Revenue Service grants to taxpayers who live overseas or are in the military, as well as the extensions offered to taxpayers in areas hit by natural disasters or other disruptions.

Remember, also that this extension covers only your federal IRS tax return. If you want an extension on the tax return for your state, you will need to file for a separate extension with your home state.

Pros of Filing for a Tax Extension

Are you wondering if a tax extension might work for you? Here are some of the big benefits of filing for an extension:

• More time to file: Take the time you need to pull together documents and decide on the deductions you want to claim.

• Reduced stress: Got a lot going on? A tax extension lightens the paperwork you need to submit by April 15.

• Better accuracy: A return with errors can cost you plenty of money and time. An extension gives you some leeway to check your sums and review your deductions carefully, especially if your financial situation is complex or has changed significantly.

• Get professional help: If your numbers are just not adding up as tax day looms, an extension allows you time to work with an expert to get it right.

Cons of a Tax Extension

That said, there are some potential drawbacks of taking a tax extension that you should be aware of.

• You still need to pay your taxes: An extension does not let you off the hook from paying any taxes by April 15. You still must pay a portion of your taxes by Tax Day. The IRS allows you to make one single payment or through four or more payments throughout the year. You can also apply to the IRS to make monthly installments.

• Interest and penalties: Paying too little on your taxes because you did not estimate your taxes correctly or because you believed you were owed a refund can result in penalties for non-payment or interest charges on outstanding amounts.

• Delayed refund: If you’re due a refund but opt to take extra time to complete your return, you’ll have to wait longer to get your refund check.

• Reduced retirement contributions: Retirement contributions for the tax year need to be made by the original tax deadline. Failing to do your return by this date might prevent you from maximizing contributions for the year.

• Delayed financial planning: Delaying your return means you won’t have a completed return in hand until much later in the year. That could make it harder to apply for credit or complete other plans for which you need to show your most recent tax return.

A common misconception is that filing for an extension increases your risk of being selected for a tax audit. There is little evidence to support this.

Is a Tax Extension Right for You?

There are plenty of good reasons why opting to file for an extension can be a wise move. These include:

1. Missing or incomplete documentation that will take some time to access, including pay stubs, tax documents, expense records, and receipts.

2. Understanding the impact of complex financial situations like investments, partnerships, multiple revenue streams, trusts, and “S” corporations on your tax situation.

3. Changes in your financial status due to marriage, divorce, retirement, relocation, or the death of a close relative that might have changed your tax situation.

4. An illness, health event, death in the family, or other unexpected event that prevents you from completing your return on time.

Conversely, there are situations where filing for an extension might not be the best idea. These include:

1. You Owe Taxes and Can't Pay. Seeking an extension to avoid paying will only make your situation worse.

2. You’re expecting a refund. There's little benefit to delaying your filing as you'll have to wait longer to receive your refund.

3. Procrastination. If you’re in a crunch because you put off doing your taxes earlier, moving the date might just put you in the same situation half a year later.

4. Not having a completed tax return. Not having a completed tax return affects your ability to apply for loans and financing, or at minimum delays important financial decisions.

How to File for a Tax Extension

Here are the key steps to filing for an extension on your personal income tax return.

1. Gather Information

Gather the documentation you have including pay records or stubs, W-2 or 1099 forms, as well as statements from your banking and investment accounts declaring any interest on deposits, dividends, or withdrawals.

2. Estimate What You Owe

Estimate what you owe based on your earnings. You can do this using IRS Form 1040-ES. Many tax programs, including the IRS’s own Free File application, should also be able to calculate this out for you—or you can seek help from a tax professional.

It’s important to decide at this point whether you will take the standard deduction or whether you will instead itemize items such as work expenses that you want to claim against your taxes. The standard deduction for 2024 is as follows:

Lastly, consider whether you want to make a single payment or four separate payments throughout the year.

3. File for an Extension

You apply for an extension by filing Form 4868 with the IRS. This form includes a declaration of your estimated income. There are several ways to file your form:

• Directly, via mail with the IRS

• Via IRS Free File, which is tax preparation software that the IRS provides to taxpayers

• Via tax-preparation software that supports Form 4868

• Through a registered tax professional

You can also skip filing Form 4868 altogether if you make a payment of your estimated taxes by tax day and note that the payment is for an extension.

How to Pay Estimated Taxes

You can pay your estimated tax bill in several ways, including:

• Online, via a dedicated IRS account or directly from your bank account, via a credit card or digital wallet, or through an electronic fund withdrawal integrated with your tax preparation software

• Via the IRS’s IRS2Go App downloaded to your smartphone

• Using the Electronic Federal Tax Payment System (EFTPS) either online or by phone

• By check or money order using the Estimated Tax Payments Voucher in Form 1040

• By cash, using an approved online payment processor

Listerhill Is Here to Help

At Listerhill Credit Union, we offer our members all the tools they need to achieve more with their money from our Growth Checking, My Goal Savings, Good Start, and Explorer Rewards accounts, to our structured Money Market, Certificate, and IRA products.

We also offer tax-smart IRA and home equity loan products to help you build for a better future, and our knowledgeable staff is always available to answer questions related to our products.

Please reach out to a Member Advocate for help with accounts that might help you take advantage of tax savings.

Contact Listerhill Credit Union