All taxpayers have an option to file a Form 4868, Application for Automatic Extension of Time to File Tax Return. This form notifies the IRS that you need more time to prepare your taxes for the current year and allots you six more months to get them prepared. By filing Form 4868 by April 15, you are avoiding a penalty for filing late.
Now here is the catch! If you owe taxes, once your return is sent to the IRS, you WILL be charged interest and penalties for not PAYING by April 15th (which is about 4% of your tax bill). To avoid this, you can send in a check that covers 90% of your tax liability to apply to your tax return with your extension. If you are really lucky and have a refund, there is no penalty and your return will be processed normally. Unfortunately, you cannot charge the government interest and penalties for keeping your money longer.
If you are self-employed, there is a benefit to filing an extension. It allows you more time to make contributions that are tax deductible.
If you forget to file an extension and owe taxes you will accrue a penalty for not filing by the deadline (about 5%) and not paying by the deadline, and don’t forget interest. These charges are calculated monthly, so, it can really add up!
Remember, this is only a six-month extension. If you fail to turn in your tax return by October 15th, you will be charged all of the above penalties and interest starting from April 15th.