Sometimes, you need more time to fully prepare and file your taxes with the IRS. That's why the government gives individuals the option to file a tax extension. A tax extension gives individual taxpayers an extra six months to submit their tax return, and allows them to pay an estimated amount of their tax liability ahead of time, while still giving them an extra few months to "officially" file.
It’s important to remember that even with an extension, any tax payment owed is still due on the day of the tax deadline. Even if you do not know your exact tax liability, you are required to make an estimate, and pay this amount to the IRS.
How do I file a cryptocurrency tax extension?
We have a blog on our website detailing how to file a tax extension with the IRS, as well as the pros and cons for doing so. We recommend checking out this guide before taking any further steps!
What's the deadline for filing an IRS tax extension?
The deadline for filing an extension is April 15, the same day as the tax filing deadline.
What if I pay too much or too little in estimated taxes?
If you overestimate or underestimate the amount you owe in taxes to the IRS, don't worry!
If you underestimate your tax liability, you’ll simply need to pay the IRS the remainder of what you owe, plus any potential penalties and interest.
If you overestimate your tax payment, the government will refund any money they owe you once you file your tax return.
Can I electronically file my tax extension?
Yes. You can electronically file a tax extension for free with the IRS using one of the processes described here.
What happens if you don’t report cryptocurrency on your taxes?
Tax evasion is considered a felony, and the IRS can track your cryptocurrency transactions with the help of a service like Chainalysis. That's why it's important to use a tool like CoinLedger to keep track of your estimated tax liability for the year before filing an extension!