Tax deadline ... Relax ... File in October instead of 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 March, it's better for you to hold that return for a little marination -- especially in these turbulent economic times.

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 2008 return may depend upon your income and expenses in 2009 which you'll know more about as October 15, 2009 draws near. 

For instance, your tax pro may see a higher income in 2009 and decide to alter your 2008 equipment purchase deduction. 

Or, losses in your self-employed pension may dissuade you from contributing now for 2008 but you may look at a contribution in a different light come September.

 

Take your time and talk with your tax professional about creating as favorable a tax scenario as possible. .

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 2008 are due by April 15, 2009.

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 2008 using tax returns of previous years as a guide. For instance, if you made 25% less in 2008 than in 2007, then figure that your tax will be about 25% less. It's best to overestimate the tax you'll owe. If you have it, pay it. You can get back the overpayment when you file and you will have avoided penalties and interest.

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.

If you still don't have the money when the October 15 deadline arrives don't file your return late. File on time and you can pay your tax later. You will owe late payment penalties and interest.

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 with instructions can be downloaded here.

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

And remember: Think like a business. Take every deduction possible. And, visit here to get your complimentary list of self-employed business deductions?

And, as always, I suggest you read the book that can simplify your tax and financial life, and save you money, SELF-EMPLOYED TAX SOLUTIONS .