Has this ever happened to you? You’ve been meaning to file your taxes for weeks, but suddenly it’s April 14 (or 15, or even 16) and you realize you haven’t finished the forms. Maybe you haven’t even started them. You’re not going to be able to file your taxes on time. Now what?
First of all, try to relax. The IRS deals with late filers all the time, and you definitely have options. You aren’t in trouble, you won’t get arrested, and you won’t lose your business or anything like that, especially since you’re still planning on filing and paying as soon as you can. So don’t panic.
One thing you can do is simply file and pay your taxes within the next few days, and prepare yourself to pay a small penalty for the late file. There’s a big difference between being a little late in filing and not filing at all, and while there is a penalty payment, the IRS won’t start thinking you’re trying to avoid filing if you’re a few days or even a week or two behind schedule. This might not be the most fun solution, but if you really only need a few more days to finish up; it’s probably the easiest.
If you know you’re going to need more than just those few days, though, your best bet is to file for an extension. The IRS allows extensions on filing taxes up to six months through Form 4868. This will give you a sizeable window to get on top of your filing, talk to accounting firms if you need to and generally finish (or start) whatever you haven’t gotten to yet. There’s a catch, though: when you file Form 4868, you’re still responsible for paying taxes on time even if you can’t file them on time, so make sure to include a payment with the form. The easiest way to determine how much to include is to estimate your tax liability, subtract out any taxes you’ve already paid and include at least a portion of the remainder.
The other big step to take if you can’t pay your taxes on time this year is to start putting practices and systems in place so that you’re able to pay on time next year. These can include setting up quarterly estimate payments, scheduling time to prepare and file forms earlier in the year, keeping clearer records so assembling documentation is a smoother process, and/or getting good help from a CPA, tax accountant, bookkeeping services provider or even a tax attorney, so you aren’t scrambling to do everything yourself like you may have been this year. You may still end up paying a penalty or dealing with an extension this year, but with some solid preparation and forethought you shouldn’t have to do it two years in a row.