Extensions
Sometimes we just don't have enough information to complete our tax return. When this happens we simply file a extension of time to file. This does not relieve us of our obligation to pay taxes which are still due April 15th, but it does give us time to get our records together.
Because of the many misconceptions regarding extensions, hopefully I will be able to clear up the most important one. A income tax extension is only extending the time to file your income taxes. It is not a extension to pay your taxes. If you owe, you still have to pay by the April 15th deadline unless that date falls on a weekend, then you have until that Monday.
This year both the Federal and California will be accepting electronically filed income tax extensions. This really is good news, in as much as you will always have proof that you filed one.
How does it work if I owe?
When you electronically file a extension and you owe, a voucher is printer and you send it and you check to the IRS, State, or both. Later on when you have all of your records together, you file your tax return, if you still owe, then you pay penalties and interest from April 15.
The best reason for filing a extension electronically is that you have proof of filing. Failure to file penalties can be huge. (Information Central has the penalties.) What prevents this from happening is that the tax agencies will respond with a acknowledgement. Almost like a proof of mailing, only better. Proof of mailing is just that, proof you mailed something. Not proof of what was inside the envelope or package, just proof you mailed something. (People have been known to send in envelopes with nothing inside.)
If you owe money and cannot pay your tax liability, file your tax return on time. Do not ask for a extension because an extension is just an extension of time to file your income tax return. It is not a extension to pay. Just file your return and worry about paying later. Both California and the IRS offer payment plans for those in dire straight, and with the exception of marriage, the is no more debtors prison.