If you can't file on time, get an extension

April 15th will be here before you know it.  If you won't be able to complete your income tax return by then, don't forget to file a Form 4868 with the IRS to give yourself up to four additional months to get it done.

Be aware, however, that an extension to file does not extend your time to pay.  The IRS will still assess interest on any unpaid tax balance.  In addition, unless you pay at least 90 percent of your estimated tax liability by April 15, you may be hit with a late-payment penalty.

In certain circumstances, even if you have no problem submitting your tax returns by the April 15th deadline, getting an extension might still be a good idea.

If you aren't able to pay all of the taxes that you owe by April 15th, an extension will allow you to defer paying some of your taxes until August 15th.  As long as you have paid 90% of your total tax liability by April 15th, you should not be subject to IRS penalties on the balance due.  And even though you will owe interest on the shortfall, the rate of interest charged by the IRS may be less than the cost of borrowing elsewhere.

If you are self-employed, and you need a few extra months to gather the money necessary to pay your income taxes and to fully fund your retirement plan, you might also benefit by filing for an extension.  To deduct contributions made to a retirement plan, the contributions must be made prior to the due date of the tax return, including extensions.  By filing a Form 4868 with the IRS, you have up to four additional months to fund your retirement plan.  One strategy commonly employed by self-employed individuals is to pay the full amount of taxes due with the extension, and then to fund their retirement plans four months later.