Feeling overwhelmed by the prospect of filing your taxes? You’re not alone. But ignoring the problem and wishing it would go away is not the solution.
If you don’t think you can manage to file your 2009 tax return by the April 15, 2010, deadline, file for a six-month extension. It’s easy. Just fill out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, estimate your tax bill, and pay what you can by April 15, 2010. That will delay the due date for your completed return until October 15, 2010.
With an extension, you can get more time for filing, but you will owe interest on any underpayment. And if you underpay by more than 10%, you may be subject to a penalty, too.
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If you have paid less than 90% of your tax bill when you file your request for an extension, you'll start racking up late-payment penalties of 0.5% a month on the unpaid amount, up to 25% of the balance, plus interest (currently 4%). Still, that's a lot better than failing to file altogether, which entails a more onerous penalty of 5% a month on the unpaid balance, up to 25%, until the return is filed.
For instance, if you file for an extension and pay your $5,000 tax bill three months later, you'll owe a $75 late-payment penalty plus interest. But if you don't file your return on time -- even if you pay up to three months later -- you'll owe a $750 penalty for failing to file.
“The bottom line is that if you don’t file, you’ll almost certainly pay more in the end,” says Mark Luscombe, principal federal tax analysis for CCH, a major provider of tax information and software.
If you don't owe any taxes, you can ignore the April 15 deadline, but you'll still want to file a tax return to claim your refund. Refunds have been averaging more than $3,000 so far this tax-filing season, up 10% from last year.
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