Tax deadline ... Relax ... File in October instead of in April

Your sister has a spring wedding planned and you’re the maid-of-honor. The April tax filing deadline is just around the corner, but there’s no time to think taxes right now.

Or…When you and Gail broke up last week, you left your tax records at her house. You’d prefer to let the storm pass before you stop by to pick up your things.

Or… The project you’ve been working on has taken so long that you haven’t found time even to look at your mail much less get your tax records together.

Will any of these reasons for filing late pass muster with the Internal Revenue Service? An unnecessary question, because you don’t need a reason to file your return after the April deadline. You can wait as late as October 15!


THE BENEFITS OF FILING AFTER APRIL 15
Ignore the old husbands’ tale that filing an extension triggers IRS computer screens to flash “Audit this return!” Not so. An extension gives you more time to collect and review your material. And, even if you have your return completed by the end of February, it’s better for you to hold that return for a little marination.

Here’s why: Most taxpayers think there is only one way to prepare a tax return. Tax pros know that income and deductions can be treated in a variety of ways. If your tax preparer understands the self-employed life, she is equipped to make choices to your tax advantage. And many of her choices for your 2007 return may depend upon your income and expenses in 2008. The later into 2008 the more you’ll know about 2008.For instance, a substantially higher income in 2008 than in 2007 may warrant a fuller deduction in 2008 for equipment purchased in 2007. Or, with a high 2007 income you may want to make a hefty contribution to your self-employed pension. If you don’t have the money right now to put into that pension, an extension gives you until October 2008 to come up with your 2007 pension contribution.Take your time and talk with your tax professional about creating a favorable tax scenario.

HOW DOES AN EXTENSION WORK?
Tax returns are due April 15. The IRS offers you an extension that gives you until October 15 to file your return. You may also need to file a state extension.

Be aware than an extension gives you more time to file your return – but does not give more time to pay your taxes. Your taxes for 2007 are due by April 15, 2008.

Automatic Extension Form 4868 must be filed by April 15. You can file online, by phone, or by mail. If you file an extension you have until October 15 to file your return.

To complete the extension, estimate your total tax liability for 2007 using tax returns of previous years as a guide. For instance, if you made 25% more in 2007 than in 2006, pay at least 25% more in taxes. If you made less, pay less. It’s best to overestimate the tax you’ll owe.

Pay the balance due or as much of it as you can. If you can’t pay the full balance due when filing your extension, or if you underestimate your tax liability, you will be charged penalty and interest on the amount owed when you file your return. Always file an extension, even if you cannot pay the full balance due.

And, come return filing time, if you still don’t have the money, don’t file your return late. File on time and you can pay your tax later. If you file your return late, in addition to any late payment penalties and interest you could also be hit with a late filing penalty.

Some anxious people rush to pay their income tax by taking cash advances on credit cards. That’s a foolish move. MasterCard and Visa finance charges are higher than Uncle Sam’s.

Federal extension form 4868 can be downloaded here.

You can get most state extensions on line. Search by your state name and the words "tax return extension."