Tax Tips: More Time From the Tax Man

Updated on February 12, 2010. 

TICK, TOCK. Uncle Sam's deadline for your 2009 return is looming, and you aren't nearly ready to file? Now could be the time to come up with a backup plan. Fortunately, the Internal Revenue Service has some sympathy for procrastinators: The paperwork for filing an extension is simple, and it will keep the feds off your back all the way until Oct. 15, 2010. In other words, the IRS will give you an automatic six-month extension.

So what's the catch? In order to complete the paperwork, you have to come up with an estimate of your total tax liability for the 2009 tax year. You also need to know exactly how much you've already forked over to the tax man in the form of withholdings from paychecks, estimated tax payments and so on. And if it turns out that you owe money, you're going to have to ante up, based on your tax estimate. (See our previous tip for advice on what to do if you can't pay your bill.) Now, for some folks, once you've completed the exercise of coming up with an estimate, you might as well just go ahead and file your taxes. But if your taxes are complicated or if you're still waiting for information you need to complete your return, filing for an extension can be a major stress reducer.

Approval of your extension application is automatic, as long as the estimate of your 2009 tax bill is "reasonable." (You'll be OK if your estimate was accurate based on the information you had at the time.) Just keep in mind, you'll be charged interest (currently at a 4% annual rate) on any outstanding balance until you file your return and cough up the remaining part you owe. If your estimate is off, you'll also be charged a 0.5% a month "failure-to-pay" penalty.

If you're still interested in extending, you must notify the IRS that you want an extension by the April 15, 2010, deadline. You can do this by filling out Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return), which you can download from the IRS web site.