Filing a tax extension for your 2016 returns

Key Points

  • The IRS will allow an extra six months to file your tax forms if you ask for an extension. However, any taxes you owe for the 2016 tax year are still due on April 18, 2017.1
  • You can file for a tax extension using IRS Form 4868.2 You’ll also need to estimate and pay your tax bill at that time.
  • Small business owners may get more time to contribute to certain retirement accounts and should verify with their tax preparer what that time frame is.
  • Individuals must make previous year IRA contributions by the April 18 deadline.

Having trouble finishing your taxes? Maybe you’re still waiting for tax information or are still sorting out your deductions. Whatever the case, by filing for a tax extension the IRS will automatically extend the deadline to file your tax forms by six months. Here’s what you need to know.

Dates to remember

  • Deadline to file Form 4868 for extension and pay any taxes owed to the IRS
  • Deadline for 2016 IRA contributions1
  • Consider any relevant state tax due dates
  • 2016 tax returns due to the IRS (if you filed an extension)

You still have to pay taxes owed by April 18

Filing for a tax extension only means you can extend the deadline to submit your tax paperwork. If you owe any taxes, payment is still due by April 18. By filing an extension and making a large enough payment, you will avoid interest charges as well as any IRS penalties related to late filing or late payment3. Those penalties can increase your tax bill by 25 percent or more.

How to file an individual extension

  • Estimate your tax bill. You first want to do a rough draft of your 1040 or consult with your tax preparer to find out what you will owe in taxes this year. If you find you are due a refund, you don’t have to worry about your tax bill.
  • Download and fill out Form 4868. This form will ask you for your estimated total tax liability and total payments for 2016 to determine the balance due (if any) with your extension.
  • Mail or electronically file the extension form with your payment by April 18 (instructions for each are included on Form 4868). Your tax return will not be due until October 16.4

Rules for small business owners

  • If you’re self-employed and filing for an extension for your personal taxes, you will have until October 16 to file your paperwork for your individual tax return. Again, any taxes you owe are due on April 18.
  • You may fund your SIMPLE IRA (savings incentive match plan for employees) or individual 401(k) until your tax filing deadline (including extensions) for this year as long as the plan originated in 2016 or before.
  • You may start and contribute to a SEP IRA (simplified employee pension) for the previous year as long as you’ve established and funded the plan no later than the business’ tax filing deadline, including extensions.
  • Remember that the IRS requires that we code SEP or SIMPLE contributions in the calendar year that they are received. An employer may, however, report the contribution for the prior plan year when filing their tax return. For more information on the IRS requirements, please see Instructions for Participant on the back of Form 5498 Line 8 (SEP contributions) or Line 9 (SIMPLE contributions).
  • Keep in mind that individuals cannot make prior year contributions to a traditional and/or Roth IRA past the original April 18 deadline.4
  • Work with your tax preparer to file the correct forms for requesting an extension.

Your advisor and tax preparer can help answer your questions about your tax situation.