Understanding Crypto Tax Extensions: What Are They and Why Do They Matter?

by
Brihasi Dey
Reviewed by
min read
Last updated:

Tax extension is a formal request to the Internal Revenue Service (IRS) or your state tax agency, granting you additional time to file your tax return. Typically, tax extensions grant you a six-month extension period.

While an extension grants you more time to gather and review your financial records and ensure accurate reporting, it doesn't extend the deadline for paying your taxes. If you fail to pay by the deadline, the IRS will apply interest on the unpaid balance. 

Filing for a tax extension can be particularly beneficial if you encounter unexpected circumstances, such as missing documents, complicated tax situations, or personal emergencies that hinder your ability to file by the original deadline.

In this article, we discuss the step-by-step process to leverage the tax extension and share everything you need to know to stay fully compliant with the IRS tax guidelines.

Steps to Filing for a Tax Extension: How to Obtain Extra Time

Filing for a tax extension is a relatively straightforward process. Here's a step-by-step guide to help you do it:

  • Determine the Deadline: The tax filing deadline may vary each year, so it's crucial to confirm the exact date for the current tax year. For US citizens, the deadline usually falls on April 15th. However, if the 15th falls on a weekend or a holiday, the deadline is typically extended to the next business day. 

Note that you must file for an extension before the tax deadline: If you anticipate needing extra time to review your documents and file your taxes, make sure to submit your extension request before the deadline.

  • Choose the Correct Form: To file for a tax extension, you will need to complete the appropriate form. For individual tax filers, the common form used is Form 4868. Each state may have its own extension form, so be sure to check with your state's tax agency or consult a tax professional to determine the correct form for your specific state.

The IRS also provides special rules and programs to assist taxpayers who are unable to pay their taxes by the deadline. To determine if you are eligible for these programs and to learn more about them, you can check here.

  • Gather the Required Information: Before filling out the extension form, gather the necessary information, including your personal details, Social Security number, estimated tax liability, and any payments made thus far. 
  • Submit the Form: Once you've completed the form, submit it to the appropriate tax agency by the deadline. The submission methods can vary, ranging from online filing to mailing a physical copy. 
  • Pay Any Taxes Owed: While a tax extension grants you additional time to file your tax return, it does not extend the deadline for paying any taxes owed. If you anticipate owing taxes, it's important to estimate your tax liability and make a payment by the original deadline. Failure to do so may result in interest charges or penalties for late payment.

What Options are Available If You are Unable to Pay Taxes by the Deadline?

If you find yourself unable to pay your taxes by the deadline, there are options available to help you address the situation and avoid potential penalties.

Even if you cannot pay the entire balance, you should still file your tax return on time and pay as much as you can. You can find all the details officially released by the IRS here.

In addition, the IRS offers options such as installment agreements, allowing you to make monthly payments, or the Offer in Compromise program, which may settle the debt for less than the full amount owed.

Seeking professional advice can help navigate these alternatives and find the best solution for your financial situation. 

Is It Necessary to File a Tax Extension for State Taxes?

The requirement to file a tax extension for state taxes alongside Form 4868 can vary depending on the state in question. While some states may align their tax deadlines with the federal deadline, others may have different filing requirements and deadlines.

Certain states may automatically grant an extension if you have received a federal extension, while others may require a separate extension form to be filed.

To ensure compliance with state tax obligations, it is recommended to consult the official website of your state's tax authority or seek guidance from a tax professional who is familiar with the tax laws in your specific state. 

Can You Request a Second Tax Extension If Needed?

In general, the IRS does not allow taxpayers to file for a second tax extension beyond the initial extension period. However, there is an exception for U.S. taxpayers who reside outside the country. They may be eligible to request an additional extension of up to 4 months.

It's important to note that taxpayers living abroad must demonstrate that they have a valid reason for needing the extension and meet the IRS qualifications.

Tips for a Smooth Tax Extension Process

Filing for a tax extension can provide much-needed relief during the tax season. To ensure a smooth process, consider the following tips:

  • Plan Ahead: Start the tax preparation process early to allow ample time for gathering documents, reviewing financial records, and seeking professional advice if needed.
  • Estimate Your Taxes: Make a reasonable estimate of your tax liability to avoid underpayment. Paying the estimated amount by the original deadline can help minimize interest charges or penalties.
  • Keep Track of Deadlines: Stay informed about tax filing deadlines for both federal and state taxes. Mark them on your calendar or set reminders to ensure the timely submission of forms and payments.
  • Seek Professional Assistance: If you find the tax process overwhelming or have complex tax situations, consider consulting a qualified tax professional. They can provide guidance, ensure accuracy, and help you navigate the tax extension process effectively.
  • Maintain Organized Records: Keeping well-organized records is essential for effective tax management. This applies not just to your personal information but also to your cryptocurrency transactions.

Leveraging crypto tax software like Kryptos can assist you in maintaining a clear overview of your crypto tax liability throughout the year. By monitoring your transactions and tracking gains/losses in real time, you can prevent the anxiety of dealing with a substantial tax bill that might become difficult to pay as the deadline approaches.

What Should You Do If You Failed to Report Cryptocurrency in Your Tax Return?

If you inadvertently failed to report your cryptocurrency transactions and are concerned about potential fines and penalties, there are steps you can take to rectify the situation and mitigate the risks involved:

Amend your tax return

You can file an amended return using Form 1040X to correct any errors or omissions. 

By providing accurate information about your cryptocurrency transactions and reporting any income or capital gains, you can demonstrate your willingness to comply with tax laws. 

Consider a voluntary disclosure

In certain cases, you may opt to make a voluntary disclosure to the IRS regarding your unreported cryptocurrency activities. 

This involves submitting a disclosure letter along with relevant information using Form 14457, which includes a dedicated section for virtual currency. Voluntary disclosure shows your intention to correct any non-compliance and can potentially lead to reduced penalties.

Use Kryptos to File Crypto Taxes on Time

The best way to avoid the need for requesting tax extensions is to proactively track your tax liability. Do not wait until the last minute as unexpected taxes can quickly become a big burden.

Kryptos helps you track all your crypto transactions and calculate your income or capital gains so you don’t miss any taxes or face last-minute hassle.

Providing users with a user-friendly interface and clear instructions, it takes just a few minutes to complete the process and you can easily download the IRS tax reports to file your taxes on time.

Want to get started? Explore Kryptos Now.

FAQs

1. How to print Form 4868?

You can get the latest revision of the form from the official website of the IRS by clicking here.

2. Do I need to file a tax extension in California?

If you need additional time to file your taxes in California, you will need to file a tax extension.

3. What is form 1040X?

Form 1040X is the Amended U.S. Individual Income Tax Return. It is used to correct errors or make changes to a previously filed tax return.

4. How can I get my income tax return copy online?

The fastest way to get your income tax return copy is to create an online account on the IRS website.

5. How do I get my taxes extended in California?

To get an extension to file your taxes in California, you can file Form 540-V, Application for Extension of Time to File California Personal Income Tax Return. You can file this form online, by mail, or in person at a California Franchise Tax Board office. The deadline to file Form 540-V is April 15th.

6. What is the extension date for California?

The extension date for California taxes is October 15th.

7. Where do I send my 4868 form in Texas?

To send your 4868 form in Texas, you can mail it to:

Texas Comptroller of Public Accounts
PO Box 13528
Austin, TX 78711-3528

You can also fax it to:

(512) 463-5700

8. How do I print a PDF tax return?

A. To print a PDF tax return, you can use the following steps:

  • Open your tax return in a PDF reader.
  • Click on the "File" menu and select "Print."
  • In the "Print" dialog box, select the "PDF" printer and click on the "Print" button.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Arrow

Understanding Crypto Tax Extensions: What Are They and Why Do They Matter?

By
Brihasi Dey
On

Tax extension is a formal request to the Internal Revenue Service (IRS) or your state tax agency, granting you additional time to file your tax return. Typically, tax extensions grant you a six-month extension period.

While an extension grants you more time to gather and review your financial records and ensure accurate reporting, it doesn't extend the deadline for paying your taxes. If you fail to pay by the deadline, the IRS will apply interest on the unpaid balance. 

Filing for a tax extension can be particularly beneficial if you encounter unexpected circumstances, such as missing documents, complicated tax situations, or personal emergencies that hinder your ability to file by the original deadline.

In this article, we discuss the step-by-step process to leverage the tax extension and share everything you need to know to stay fully compliant with the IRS tax guidelines.

Steps to Filing for a Tax Extension: How to Obtain Extra Time

Filing for a tax extension is a relatively straightforward process. Here's a step-by-step guide to help you do it:

  • Determine the Deadline: The tax filing deadline may vary each year, so it's crucial to confirm the exact date for the current tax year. For US citizens, the deadline usually falls on April 15th. However, if the 15th falls on a weekend or a holiday, the deadline is typically extended to the next business day. 

Note that you must file for an extension before the tax deadline: If you anticipate needing extra time to review your documents and file your taxes, make sure to submit your extension request before the deadline.

  • Choose the Correct Form: To file for a tax extension, you will need to complete the appropriate form. For individual tax filers, the common form used is Form 4868. Each state may have its own extension form, so be sure to check with your state's tax agency or consult a tax professional to determine the correct form for your specific state.

The IRS also provides special rules and programs to assist taxpayers who are unable to pay their taxes by the deadline. To determine if you are eligible for these programs and to learn more about them, you can check here.

  • Gather the Required Information: Before filling out the extension form, gather the necessary information, including your personal details, Social Security number, estimated tax liability, and any payments made thus far. 
  • Submit the Form: Once you've completed the form, submit it to the appropriate tax agency by the deadline. The submission methods can vary, ranging from online filing to mailing a physical copy. 
  • Pay Any Taxes Owed: While a tax extension grants you additional time to file your tax return, it does not extend the deadline for paying any taxes owed. If you anticipate owing taxes, it's important to estimate your tax liability and make a payment by the original deadline. Failure to do so may result in interest charges or penalties for late payment.

What Options are Available If You are Unable to Pay Taxes by the Deadline?

If you find yourself unable to pay your taxes by the deadline, there are options available to help you address the situation and avoid potential penalties.

Even if you cannot pay the entire balance, you should still file your tax return on time and pay as much as you can. You can find all the details officially released by the IRS here.

In addition, the IRS offers options such as installment agreements, allowing you to make monthly payments, or the Offer in Compromise program, which may settle the debt for less than the full amount owed.

Seeking professional advice can help navigate these alternatives and find the best solution for your financial situation. 

Is It Necessary to File a Tax Extension for State Taxes?

The requirement to file a tax extension for state taxes alongside Form 4868 can vary depending on the state in question. While some states may align their tax deadlines with the federal deadline, others may have different filing requirements and deadlines.

Certain states may automatically grant an extension if you have received a federal extension, while others may require a separate extension form to be filed.

To ensure compliance with state tax obligations, it is recommended to consult the official website of your state's tax authority or seek guidance from a tax professional who is familiar with the tax laws in your specific state. 

Can You Request a Second Tax Extension If Needed?

In general, the IRS does not allow taxpayers to file for a second tax extension beyond the initial extension period. However, there is an exception for U.S. taxpayers who reside outside the country. They may be eligible to request an additional extension of up to 4 months.

It's important to note that taxpayers living abroad must demonstrate that they have a valid reason for needing the extension and meet the IRS qualifications.

Tips for a Smooth Tax Extension Process

Filing for a tax extension can provide much-needed relief during the tax season. To ensure a smooth process, consider the following tips:

  • Plan Ahead: Start the tax preparation process early to allow ample time for gathering documents, reviewing financial records, and seeking professional advice if needed.
  • Estimate Your Taxes: Make a reasonable estimate of your tax liability to avoid underpayment. Paying the estimated amount by the original deadline can help minimize interest charges or penalties.
  • Keep Track of Deadlines: Stay informed about tax filing deadlines for both federal and state taxes. Mark them on your calendar or set reminders to ensure the timely submission of forms and payments.
  • Seek Professional Assistance: If you find the tax process overwhelming or have complex tax situations, consider consulting a qualified tax professional. They can provide guidance, ensure accuracy, and help you navigate the tax extension process effectively.
  • Maintain Organized Records: Keeping well-organized records is essential for effective tax management. This applies not just to your personal information but also to your cryptocurrency transactions.

Leveraging crypto tax software like Kryptos can assist you in maintaining a clear overview of your crypto tax liability throughout the year. By monitoring your transactions and tracking gains/losses in real time, you can prevent the anxiety of dealing with a substantial tax bill that might become difficult to pay as the deadline approaches.

What Should You Do If You Failed to Report Cryptocurrency in Your Tax Return?

If you inadvertently failed to report your cryptocurrency transactions and are concerned about potential fines and penalties, there are steps you can take to rectify the situation and mitigate the risks involved:

Amend your tax return

You can file an amended return using Form 1040X to correct any errors or omissions. 

By providing accurate information about your cryptocurrency transactions and reporting any income or capital gains, you can demonstrate your willingness to comply with tax laws. 

Consider a voluntary disclosure

In certain cases, you may opt to make a voluntary disclosure to the IRS regarding your unreported cryptocurrency activities. 

This involves submitting a disclosure letter along with relevant information using Form 14457, which includes a dedicated section for virtual currency. Voluntary disclosure shows your intention to correct any non-compliance and can potentially lead to reduced penalties.

Use Kryptos to File Crypto Taxes on Time

The best way to avoid the need for requesting tax extensions is to proactively track your tax liability. Do not wait until the last minute as unexpected taxes can quickly become a big burden.

Kryptos helps you track all your crypto transactions and calculate your income or capital gains so you don’t miss any taxes or face last-minute hassle.

Providing users with a user-friendly interface and clear instructions, it takes just a few minutes to complete the process and you can easily download the IRS tax reports to file your taxes on time.

Want to get started? Explore Kryptos Now.

FAQs

1. How to print Form 4868?

You can get the latest revision of the form from the official website of the IRS by clicking here.

2. Do I need to file a tax extension in California?

If you need additional time to file your taxes in California, you will need to file a tax extension.

3. What is form 1040X?

Form 1040X is the Amended U.S. Individual Income Tax Return. It is used to correct errors or make changes to a previously filed tax return.

4. How can I get my income tax return copy online?

The fastest way to get your income tax return copy is to create an online account on the IRS website.

5. How do I get my taxes extended in California?

To get an extension to file your taxes in California, you can file Form 540-V, Application for Extension of Time to File California Personal Income Tax Return. You can file this form online, by mail, or in person at a California Franchise Tax Board office. The deadline to file Form 540-V is April 15th.

6. What is the extension date for California?

The extension date for California taxes is October 15th.

7. Where do I send my 4868 form in Texas?

To send your 4868 form in Texas, you can mail it to:

Texas Comptroller of Public Accounts
PO Box 13528
Austin, TX 78711-3528

You can also fax it to:

(512) 463-5700

8. How do I print a PDF tax return?

A. To print a PDF tax return, you can use the following steps:

  • Open your tax return in a PDF reader.
  • Click on the "File" menu and select "Print."
  • In the "Print" dialog box, select the "PDF" printer and click on the "Print" button.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

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