Some people have asked me whether they should file a tax extension (tax form 4868) if they can’t afford to pay their tax bill. Unfortunately, being unable to pay your taxes isn’t a reason the government accepts to file an extension. Neither is procrastination.
The only reason I can think of for filing an extension is if there’s a delay in receiving one of your tax documents that will materially alter your taxable income. The most common form that’s sometimes late is the K-1 form from a business partnership, S corp, or trust and estate beneficiary. You should always be able to receive your 1099s and W2s on time.
The K-1 form from my venture debt investment won’t be coming out until the summer. As a result, I’m forced to file an extension because there’s several thousand dollars in pass through income I’ll receive, which requires tax payments. I’m owed refunds of about $1,000 from both Federal and California, so waiting several more months to file isn’t a big deal. If I owed, then I’d still have to pay at least 90% of what I think I owe to avoid penalties. Extension filers have until October 15 to submit their returns.