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How to File a Free Income Tax Extension

This article was written by in Taxes. 12 comments.


I finally provided my tax details to my accountant yesterday. As I expected, there won’t be enough time to work out the details before today’s tax filing deadline, so I’ll be filing extensions. In years past, when I filed for myself and my taxes were simpler, I usually waited until the last day. My procrastination has been helped by the availability of online filing. I’m thrilled to no longer need to run to the post office late at night on April 15. (This year, the deadline is April 17 due to a holiday in D.C.) In recent years, I could just as easily fill out the paperwork and file in my pajamas without leaving the house, even from the comfort of my own bed with a laptop computer.

The last few years, my taxes have grown more complicated, and my accountant now has me in the habit of filing an extension every year. This gives me six extra months to file my paperwork, a task getting increasingly complicated, having moved from an employee with only W-2 income, to a “part-time” self-employed individual with some income recorded on W-2 forms, some on 1099 forms, and some on no forms, to the sole owner of a business filing with an S-Corp status, with K-1 forms in addition to 1099s and W-2s, to an even more complicated situation in 2011.

Filing a federal extension for your personal taxes is free and simple. Before you get started, find your previous year’s final tax return (or just your adjusted gross income amount) to verify your identity with the IRS. Make sure you know your other personal information, like Social Security number, and have the information from your W-2 ready.

Step 1. Visit the IRS-sanctioned website, Free File Fillable Forms. Popular tax filing software programs also offer customers the ability to file for an extension. With the IRS-sanctioned website, you can be sure that the service will always be free and you won’t be distracted by advertisements for paid products. As of today, it’s free to file an extension using TurboTax, but there is no guarantee that this method will be free on the day you want to file your extension.

Step 2. Create your account. Whether you use the Free File Fillable Forms website (hereafter called “FFFF” for brevity) or commercial software, you’ll be required to create an account or login to an existing account. If you’re creating a new account, select a user name that will be easy to remember. With FFFF, you’ll have the opportunity to print your account username and password for reference.

Step 3. Select the appropriate form. With FFFF, you have the choice between forms 1040, 1040A, and 1040EZ. You’ll need to select the form that’s right for you. Form 1040 is the most comprehensive choice, so it is always safe. Depending on your situation, you may not be able to file your taxes using forms 1040A or 1040EZ. Keep in mind that you can still use TurboTax, H&R Block, or any other software to file your taxes before the extended deadline. Even if you file your extension using FFFF, you do not need to return to the IRS-sanctioned website to finalize your tax return. For example, I filed my extension via FFFF myself, but my accountant will be filing my tax return later this year using the method of his choosing. If you plan on finishing your return using some other method, just choose Form 1040 here by clicking the “Start 1040″ button.

Step 4. Complete your personal information. Begin by entering your information at the top of form 1040. Include just your name, address, and Social Security number. At the top right of the screen, there is a button labeled “EXT” that looks like the image included here. Click that button (on FFFF, not here).

Step 5. Estimate your tax liability. Here’s the problem with filing for an extension: the IRS won’t extend the deadline for paying any tax that you owe. Only the paperwork receives the extension. If you haven’t paid your full tax bill, you may owe money. You need to estimate how much total tax you owe for last year’s income. On the form, you will then subtract your total payments, including withholding from your job. To avoid having to pay any penalties, your total payments must be 100% of what you owe. I added up all the payments I made, included withholding from my former day job, the amount of last year’s overpayment that I applied to this year’s taxes, and the estimated payments. Since I paid more than my estimated total liability, I did not need to make a payment when filing for the extension.

Step 6. Complete the form. You’ll need to select a PIN, enter your birthday, and consent to the disclosure statement.

Step 7. Pay your tax liability. If you’ve determined in Step 7 that you need to pay when filing for an extension to avoid a penalty, you have a few options. You can print form 1040V and send a check to the IRS, or you can provide your tax filing service, whether FFFF or a private software company, with your banking information. The IRS will pull the amount you specify from your account electronically using direct debit.

Step 8. Submit your extension. Once all the information is complete, the “E-File Extension Now” button will be available at the top of the page if you’re using FFFF. With other software, you will be prompted to file your extension paperwork at the end of the process, though in some cases, you might need to pay a fee. You’ll receive responses through email twice. The first will come as soon as you submit your form to notify you that the extension has been submitted to the IRS. Within hours, if there is no problem with the information you entered, you should receive a second response to notify you that the IRS has accepted your extension paperwork and you will now have an extra six months to file your taxes.

Don’t forget to look into filing an extension for your state taxes as well. In New Jersey, where I live, this is easy. I do not need to file any paperwork in New Jersey for my personal extension. When the IRS grants an extension for federal tax returns, New Jersey will automatically allow the later deadline. If I didn’t pay enough state taxes throughout the year, I would need to pay the state when filing for the extension, just like I would need to with the federal tax extension. When I file my paperwork later this year, I can include a copy of my federal extension form and the state will not penalize me for filling late. Different states may operate differently, so always verify what you need to do before the initial tax filing deadline.

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The Best Travel Rewards Credit Cards, May 2012

This article was written by in Credit, Featured. 16 comments.

It’s time to plan your holiday travel. That may mean cashing in the travel rewards you’ve accumulated on credit cards — or it may mean starting to use a travel rewards credit card. Chances are you spend money on some necessities, and when you do, tailoring the rewards you receive to your travel needs could end up financially benefiting you and your family even more than a cash back credit card might. Keep in mind, of course, that increasing your spending just to earn rewards doesn’t make sense, and it would be worse if you had to pay interest on your balances.

When you have controlled spending that you can afford, and you pay your credit card bill in full and on time every month, you can offset your costs of travel by earning rewards. Using the travel rewards credit card that best matches your travel needs for the spending you would be doing anyway could save you hundreds or thousands of dollars over the course of a lifetime. For example, some cards offer free flights and hotels while others can soften the blow of foreign transaction fees.

Listed below are the best travel rewards credit cards available today. If you’ve got a card you think deserves to be on this list, let us know and we’ll add it.

Editor’s choice

Chase Sapphire Preferred CardChase Sapphire℠ Preferred Card. The Chase Sapphire℠ Preferred Card offers a bonus if you spend at least $3,000 on the card in the first three months. That reward comes in the form of 40,000 bonus points, which can be redeemed for $500 in travel booked through Ultimate Rewards. When you book through Ultimate Rewards you can get 20% off airfare, hotels, car rentals and cruises. Additionally, you can earn double rewards on travel and dining purchases. The Chase Sapphire℠ Preferred Card carries no annual fee for the first year, $95 thereafter. There are no blackout dates or restrictions of any kind when using your rewards points.

For more about the Chase Sapphire℠ Preferred Card 40,000 bonus points introductory offer, visit my Chase Sapphire℠ Preferred Card Earn 40,000 bonus points review.

Miles by Discover® CardMiles by Discover® Card. The Miles by Discover Card offers the opportunity to earn 12,000 bonus miles during the first year you own the card. The card provides 1,000 miles for each month you make at least one purchase. You can earn double miles on your first $3,000 in combined travel and restaurant purchases each year and one mile on all other purchases. Unlike many travel rewards credit cards, the Miles by Discover Card carries no annual fee for the life of the card and has an introductory offer of 0% APR on purchases and balance transfers for up to six months.

Starwood Preferred Guest® Credit Card from American ExpressStarwood Preferred Guest® Credit Card from American Express. The Starwood Preferred Guest Credit Card from American Express continues to be one of the best travel rewards credit cards you can find. 25,000 bonus Starpoints can be yours in two easy steps. First, you earn 10,000 bonus points after making your first purchase, then 15,000 more bonus points can be earned if you spend $5,000 on your new card in the first six months, which is enough for a six night stay at a category 1 or 2 hotel.

With this card you can earn up to 5 Starpoints at hotels and resorts participating in the Starwood Preferred Guest program. When redeeming your points you can select from over 1,000 hotels and resorts in nearly 100 countries and for flights on more than 350 airlines, all with no blackout dates*. The Starwood Preferred Guest Credit Card from American Express carries no annual fee for the first year, $65 thereafter.

Premier Rewards Gold CardAmerican Express® Premier Rewards Gold Card. The American Express® Premier Rewards Gold Card offers 25,000 points when you spend at least $2,000 in the first three months. You can earn membership points three times as fast when you book airfare using this card and twice as fast when you purchase gas or groceries. The American Express® Premier Rewards Gold Card carries no annual fee for the first year, $175 thereafter.

PenFed Premium Travel Rewards American Express® CardPenFed Premium Travel Rewards American Express® Card. The PenFed Travel Rewards American Express Card is like no other in terms of rewards, offering consumers 5 points for every dollar spent on airfare. If you spend at least $650 within the first three months of card ownership, you’ll receive 20,000 points, enough for $250 toward a round-trip ticket. At least one reward point per dollar will be earned on all other purchases. The PenFed Premium Travel Rewards American Express® Card does not have an annual fee. There is an introductory APR of 4.99% on balance transfers made between April 1, 2012 through June 30, 2012, and there is no balance transfer fee on transfers made between April 1, 2012 through June 30, 2012. However transfers made after that time will cost a relatively low 3% balance transfer fee with a minimum of $10 and a maximum of $250. You must be a PenFed member to be approved for this card, but if you are not associated with the military, the American Red Cross, or any number of qualifying organizations, a one-time $15 or $20 membership donation will do the trick.

Capital One® Venture Rewards Credit Card. You earn 10,000 bonus miles on your Capital One Venture Rewards Credit Card after you spend $1,000 in the first three months of owning your card. You can earn double miles on every purchase, making this card one of the best travel rewards credit cards available today. The Capital One Venture Rewards Credit Card carries no annual fee for the first year, $59 thereafter, and Capital One is the only issuer that does not charge foreign transaction fees for any of their cards. This means if you spend money on international purchases, you won’t receive the typical 1% to 3% fee.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

Photo: Kossy@FINEDAYS

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Credit Card Debt Consolidation

This article was written by in Debt Reduction. 8 comments.

According to the Federal Reserve’s research published last week, overall American credit card debt increased at an annual rate of 7.5% during the final quarter of last year. This could mean that consumers are feeling more confident about the economy and are willing to take the risk that they will have money in the future to pay off debt. These numbers are seasonally adjusted, too, so it’s not a result of holiday spending.

For any individual or family, increased use of credit cards might cause financial turmoil if debt spirals out of control. Even people who understand the guiding principle of spending less than you earn can fall into a debt trap if they spend what they expect to earn rather than what they have in the bank to cover their debt.

Credit card debt consolidationAt some point after a period of indiscriminate spending, the monthly minimum payments on total credit card debt could exceed leftover cash flow after paying for the necessities like food and shelter. This might be a good opportunity to consolidate the credit card balances onto one card. This has the benefit of, in many cases, lowering your total monthly minimum payment. Additionally, you might find a way to significantly lower your interest rate. Of course, if you pay less towards your credit cards, it will take longer to get out of debt, but in some cases when cash flow is tight, having the extra income at the end of the month for saving or for meeting all of your ongoing expenses is more important.

In a perfect world, you would be able to transfer all your credit card balances onto one card that has the following features:

  • 0% APR for the life of your balance.
  • No balance transfer fee.
  • A low minimum monthly payment requirement.

The best credit card is going to be difficult to find, and if you do find one that meets these criteria, it may be out of your reach in terms of qualification. The goal is to find the best deal you can, either from within your current cards or by applying for a new 0% balance transfer credit card.

Start by calling the number on the back of each credit card. Explain to the customer service representative that you plan to move balances from your other cards to this card to pay off your debt, and ask for their best deal for balance transfers. You may find that the issuer offers you an unpublished deal. Be sure to ask about introductory APR, length of the introductory term, regular APR for balance transfers after the introductory period expires, balance transfer fee, and monthly minimum payment.

At the same time, while you’re talking to the customer service representative for each card, you might want to take the opportunity to ask for a lower ongoing interest rate on your card. It can’t hurt. It’s easy to ask, and you might get a cost-saving result immediately.

Don’t make the decision on the phone, however. Write down the terms the issuer offers and do the same for all other cards you own. This will help you compare the offers with the published offers from issuers offering balance transfer deals. Once you compile all information, you can make an informed decision about the best card for consolidating your credit card debt.

You may also wish to compare these offers with a loan for consolidation. Many people have had luck asking for a loan on a peer-to-peer lending network like LendingClub and Prosper, but your state may regulate what you are able to receive through these services.

Watch out for companies that offer to consolidate your credit card debt. Many charge an up-front fee and don’t provide any kind of cost savings beyond what you could easily achieve on your own. At worst, some charge an up-front fee and disappear. If you must seek outside help for your debt, go to a well-vetted non-profit organization that will provide advice, not charge you for their services. Even with this in mind, you’ll need to be careful; some companies appear to be non-profit credit counseling agencies until you look very closely.

Once you transfer your balances to a card, don’t use that card for any other spending. It should be dedicated to paying off your balances over time. Also, don’t immediately close your existing credit cards. You can cut them up, leaving one for emergency spending until you build up an emergency fund in the form of a savings account. Closing your credit card accounts might damage your credit score at a time when you might prefer to keep your number as high as possible.

When I first realized I needed to get out of debt and I had balances across several credit cards, this was one the first steps I took in order to get my finances organized, save money, and find a way to get and stay out of debt. What are your suggestions for consolidating your credit card debt?

Photo: sovietmole
Federal Reserve

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Save Money: Break Up Before Valentine’s Day

This article was written by in People. 16 comments.

This is a guest article by Jennifer Calonia, Junior Editor at GoBankingRates. In the article, the author encourages couples in failing relationships to break-up before holidays and their obligatory expenses are imminent.

While it may sound like the antithesis of romance, calling it quits with your other half before the Valentine’s Day can be advantageous to your heart and your checkbook. Gift-giving and travel (if your significant other is across country) on Valentine’s Day is poised to destroy the savings of those who are too apprehensive to raise the white flag of surrender when it comes to their dead-end relationship.

According to a 2010 report by graphic designers Lee Byron and David McCandless, more couples break up toward the end of the calendar year–peaking two weeks before Christmas and the month after Valentine’s Day.

Valentine's DayThe data were gathered by conducting a year-long search on Facebook statuses which included the words “break up” or “broken up.”

Many argue that data used by Byron and McCandless is drawn from a highly defined sample pool, noting that most Facebook users are younger in their years. Despite that limitation, this study raises significant questions for those in the midst of a turbulent or stagnant relationship.

Break up to save money on gifts and travel

As the saying goes, “breaking up is hard to do,” but it could be a wise financial decision to opt out of your relationship if it’s already hit a brick wall. Instead of waiting for the report’s break-up peak after Valentine’s Day, why not face reality before February lands on your doorstep?

Observances like Valentine’s Day are among the highest-rated gift-giving holidays among couples next to birthdays. According to the National Retail Federation, in 2011, the average expense on Valentine’s Day gifts to a significant other was $68.98 — a figure that is on the rise.

Further, all of the subsequent holidays in the year (i.e. Thanksgiving, Christmas, New Year’s and a sprinkled birthday) present an open door for extra out-of-pocket travel expenses when planning to attend your partner’s family gathering or scheming a romantic getaway.

At the risk of being denounced as cold-hearted or even cheap, severing strained relationships before Valentine’s Day is at minimum, a savvy move for your wallet.

Broken heart: better investment

Seeking out and fostering a relationship with a partner is at its root an effort in finding a spouse. Stringing your significant other along when you don’t see a future ahead is not only by many people’s standards cruel, it’s a fruitless investment. Whether you’re dealing with emotions or finances, keeping long-term goals in sight are an important aspect of achieving success and happiness, overall.

Struggling relationships may not see another opportunity to break up until March, and time is money. There is never a “good time” to break-up, so biding one’s time after the holiday season and into Valentine’s Day is not the most effective approach in the long haul.

Break up with civility before February 14 comes around and open yourself up to a well-rounded year of improvements in 2012.

Editor’s note: I can’t say I’m a fan of making relationship or romantic decisions with finances as a trigger. Personal finance experts tend to see the world in terms of money; if you’re a hammer, everything looks like a nail, or so the saying goes. Obviously finances must be a consideration in major decision-making, and ending a bad relationship earlier rather than later is a better choice than lingering. The worst case scenario is losing a quality relationship over the cost of a bouquet of flowers or a meaningful gift.

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Podcast 143: Tax Law Changes in 2012

by Flexo

Today on the Consumerism Commentary Podcast, Bryan J Busch talks to Kathy Pickering, Executive Director of H&R Block’s Tax Institute. They discuss the difference between smart investments vs. emotional decisions, the importance of financial planning, and how most people are better off just buying an index fund and ignoring investment gurus. Consumerism Commentary Podcast Tax ... Continue reading this article…

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The Power of Customer Outrage

by Flexo

In what almost seemed like a staged publicity stunt, Verizon Wireless quickly rescinded their plans for a new $2 fee for most bill payment options. An employee leaked an internal memo describing the new fee, and within twenty-four hours, the wireless company both confirmed and then rescinded the fee, citing their policy of listening to ... Continue reading this article…

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Payroll Tax Cut Extended for Two Months

by Flexo

After political bickering, the House of Representatives agreed to make a deal with the Senate to extend the payroll tax holiday. This tax cut reduced the payroll tax — a tax separate from but often associated with federal income tax — from 6.2 percent to 4.2 percent of the first $110,100 of wages. The tax benefits Social ... Continue reading this article…

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A Financial Festivus for the Rest of Us

by Flexo

To all those who celebrate, have a successful Festivus. I’ve come to be a fan of this secular “holiday,” celebrated every year on December 23 following its mass introduction to the public through an episode of Seinfeld. At its core is a non-commercial, non-religious approach to the season. While I do enjoy gift exchanges with ... Continue reading this article…

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