FROM BUSTLE.COM
1. Choose your own adventure: finish your return or file an extension
You’re going to need to do something — either file your taxes or request an automatic six-month extension — by April 15 to avoid the late-filing penalty of five percent of the unpaid balance per month (this penalty doesn’t typically apply if you’re owed a refund).
Whether you’ve gotten the ball rolling or not, if you have a straightforward tax situation — for instance a single person with one or two W-2s — you should carve out an hour between now and April 15 (NOT at 11 p.m.) and just do the damn thing. Pay close attention to detail, though, because last-minute filers are more likely to make a mistake.
If you’re almost finished, but waiting on an important tax document, like a missing 1099 or a corrected W-2, then by all means, file an extension and pay any taxes due, then wait until you receive the pertinent doc to file your return.
If you haven’t started yet and you have a complicated tax situation because you do a lot of freelance work or own your own business, then you’ll also probably want to buy yourself some extra time.
BUT if you’re holding off simply because you don’t have the money you owe, that is a bad strategy. You’re merely delaying an inevitable few hours (maybe less!) of intense concentration and misery for a hefty price tag of increased interest and penalties. If a flush bank account is the only thing standing between you and your completed 2014 tax return, then just come clean to Uncle Sam now:
- If you owe less than $50,000, you can apply via the Online Payment Agreement for amonthly installment plan with a term of up to 72 months. I’ve done it before — it’s super quick and easy.
- Another option for taxpayers experiencing financial hardship is the Offer in Compromise, tax relief that settles your liability with the I.R.S. for less than the full amount due. You can complete this online Offer in Compromise pre-qualifier to see if you’re eligible.
Whatever you decide, choose an adventure that doesn’t end with the I.R.S. levying your paychecks or seizing your property.
2. Estimate your 2014 tax liability
Once you’ve determined that filing an extension is the right course of action for you, you’ll need to approximate tax liability for 2014. If you’re using e-file, most software will help calculate that for you after you’ve entered your W-2s and 1099s.
However, if you’re going the old-fashioned paper route, you’ll need to add up your gross income yourself. If you’re single with no kids, subtract the standard deduction of $6,200 (unless you’re itemizing your deductions because of extreme medical bills or charitable contributions) and your personal exemption of $3,950 from the total — the result is your adjusted gross income — then scan the 2014 tax table for your AGI and filing status to find your tax liability for this year.
3. Figure out how much you already paid
Again, tax software makes this step a lot easier by tallying it for you. E-file is unquestionably the way to go unless you’re allergic to the Internet or living in a remote cabin somewhere. If you’re filing a paper copy, you’ll need to collect all your W-2s and add up the federal taxes paid from line 2. Also check to see if you have any federal income tax withheld on line 4 of your 1099s, but that’s a lot more rare.
4. Pony up
Your unpaid tax balance is still due on April 15 even if you’re filing an extension. I repeat, your unpaid tax balance is still due on April 15 even if you’re filing an extension. Ideally you’ll be able to pay any outstanding taxes along with your extension. However, if you’re unable to pay in full at the moment, see the alternative options listed under step 1.
5. File Form 4868 either electronically or via mail
Whether you e-file your extension or submit a paper copy, completing this application is a breeze. You’ll just need your usual name, address, Social Security number, and the totals from steps 2 and 3 above. Once you’ve filled everything out, simply click submit or pop it in the mail, and now you’re good to go until your newly extended October 15 deadline!
6. Figure out your state’s tax extension policy
Form 4868 covers your delay as far as Uncle Sam is concerned, but what about Auntie California or wherever you live? Requirements for tax extensions vary state by state. Some, such as Wisconsin, Alabama, and California, offer automatic extensions with no additional paperwork, but in other states, like New York, you need to file a request. Research your state’s rules and file an extension, if necessary.
7. Actually remember to finish your return
Yes, you garnered yourself an additional six months to do your taxes, but time flies and it’s important not to procrastinate right up to the deadline again. Your automatic extension gives you until October 15 to file your return, but why not finish as soon as you have everything you need and a few sober hours to get it all done? Just imagine how amazing that will feel.
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