As you probably know, your income taxes are due on April 15. However, this is not really the final date to file your 2013 return.
You can get a six-month extension to file, meaning that your return won't be due until Oct. 15, 2014. Filing for an extension couldn't be easier. All you have to do is file Form 4868, Application For Automatic Extension of Time To File U.S. Individual Tax Return. You can do this electronically or by postal mail. For filing details, see my article "Need more time for taxes? File an extension."
Tax time image via Shutterstock.
You might be thinking: "This sounds too easy. What's the catch?"
There is one catch. Extending your time to file your return does not extend your time to pay your income and self-employment taxes. These taxes remain due in full on April 15.
So, if you do owe the IRS money, you'll need to estimate out how much and pay the amount before April 15. If you pay late, you'll be charged a late payment penalty on the outstanding balance of 0.5 percent per month and interest at a rate of 3 percent per year.
Although filing an extension doesn't increase the time you have to pay your taxes, it does give you -- and your tax pro, if you hire one -- ample extra time to ensure that you file a complete and accurate tax return.
For this reason, tax pros love filing extensions. If you're missing or haven't received all the records you need to complete your return, you'll also have more time to obtain them. You're much better off waiting and filing a return that will pass IRS muster. In short, there is no real downside to filing an extension.
Extension of time to fund retirement plans
Filing an extension has an additional significant benefit for the self-employed: It gives you an extra six months to fund your retirement plan.
If you have a SEP-IRA, solo 401(k), or SIMPLE IRA, you don't have to make your contributions for 2013 until the deadline for filing your 2013 return. If you file an extension, this deadline is Oct. 15, 2014. When you figure how much you tax owe by April 15, you can count the contributions you plan to make by the Oct. 15 deadline.
Note, however, that you must have established your SIMPLE IRA or solo 401(k) by Dec. 31, 2013, to make a contribution for 2013. But, if you file an extension, you can open and fund a SIMPLE IRA for the 2013 tax year as late as Oct. 15, 2014.
If you have a traditional or Roth IRA, you're out of luck. It had to be established and funded by Dec. 31, 2013, for your contributions to apply to the 2013 tax year.
2014 estimated tax payments due April 15
April 15 is also the due date for your first estimated tax payment for the 2014 tax year. If you made a payment on Jan. 15, 2014, that was for the last quarter of 2013.
There is no extension for this due date. This payment is made separately from your 2013 income tax payment. For details, see my articles "Stay on top of estimated tax payments and avoid IRS penalties" and "Don't sweat quarterly tax deadline."
Stephen Fishman is a tax expert, attorney and author who has published 20 books, including "The Real Estate Agent's Tax Deduction Guide," "Working for Yourself," "Deduct It!" and "Working with Independent Contractors." His website can be found at fishmanlawandtaxfiles.com.