Strategy: Buy extra time by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, by April 15. This automatically entitles you to file your federal tax return as late as Oct. 15, 2010—no questions asked!
Applying for this six-month extension enables you to methodically pull together all the records you need instead of scrambling furiously to complete your return.
You may obtain an extension whether you file electronically or by paper. A paper mail request must be postmarked by April 15.
However, be aware that an extension to file is not an extension to pay tax. You still must provide an estimate of your personal income tax liability based on the information you have when you file for the extension.
Furthermore, you must pay at least 90% of the tax liability by the original tax return due date. Otherwise, you will be assessed a late payment penalty for each month dating from the original due date to the date of payment, plus interest figured on the regular interest rate for underpayments (currently 4%).
Note that a filing extension may provide additional tax benefits. For instance, if you’re self-employed, you can still make tax-deductible contributions for the 2009 tax year as late as Oct. 15, 2010, if you obtain the automatic filing extension.
Caveat: The filing extension doesn’t extend the normal April 15 deadline for contributions to a traditional IRA.
Similarly, if you apply for a filing extension, you might be able to take more time to complete a like-kind exchange of real estate properties. The deadline is the earlier of 180 days or your tax filing due date, including any extension.
Tip: Find Form 4868 at www.irs.gov/pub/irs-pdf/f4868.pdf.