- Tips for preparing and filing your tax extension
Tips for preparing and filing your tax extension
Information you'll need to prepare your tax extension
Here is a quick list of items you'll want to have handy to prepare your extension:
- Your spouse’s (if applicable) as well as your own SSN and Date of Birth
- Your address
- A copy of your 2007 tax return (for your AGI and tax liability from last year)
- How much money you have already paid in taxes for 2008
- Your 2008 tax liability (don’t worry if you don’t have this available, we will help you later)
- Your bank account and routing number (if you owe taxes)
- Your User ID and password for your account on TurboTax.com (if you have one)
Estimating your 2008 tax liability
It is important that you estimate your tax liability as close as you can when filing your extension. The extension extends your time to file, but not your time to pay -- and in order to avoid an underpayment penalty, you need to pay at least 90% of your tax liability by April 15th.
To break it down into the simplest terms, your tax situation gets boiled down to one number. You start with your total income, minus any adjustments, deductions and exemptions to arrive at your taxable income. In most cases, that number is then compared to a tax table to find out how much tax you owe. (Please note there are less common sources for calculating your tax rate, such as the Capital Gains rate.)
Once you know how much tax you owe, you apply any credits to that amount and compare it to your tax payments for the year. If your payments exceed the tax, then you get a refund for the difference. If your payments are less than the tax, you will need to pay the difference. This is the amount that you need to include with your extension and be sure it is filed before April 15th.
If you are sure that your situation has changed, you can use our calculator, TaxCaster. It will ask you for all this information and do the math for you, as shown in this video.
Add up the following from 2008 to get how much you paid in federal taxes:
- Taxes withheld by your employer(s) on your W-2(s) (Box 2 of your W-2)
- Estimated taxes you sent the IRS
- Any portion of your refund from 2007 that you applied to your 2008 taxes (2007 1040 line 75 or 1040A line 45)
- Earned Income Credit (EIC) you expect for 2008 (2008 1040 line 64, 1040A line 40 and 1040EZ line 8)
- Any excess Social Security taxes withheld from your wages or income
If your tax situation hasn't changed that much, you can use last year's return to estimate if you owe or will be getting a refund. If you owed, submit at least the same amount you had to pay last year. You will find the amount you owed from last year on:
- Line 76 of the 1040
- Line 46 of the 1040A
- Line 12 of the 1040EZ
This doesn't guarantee the IRS won't penalize you if it turns out your tax situation has changed and you owe a lot more than you think, but it will definitely be better than nothing.
Alternatively, you could use TurboTax to do as much of your taxes now as you can and get an estimate for how much you owe (or will be refunded) this year. There's no charge to use TurboTax Online until you file. Then, when you are ready to file, it's already saved all the work that you did estimating your liability in your tax return ... and there's no need to do that work over again.
