Education Tax Credit And Deductions

American Opportunity Tax Credit

Eligibility criteria

• A student must be pursuing a recognized educational credential such as a certificate or degree
• Must attend an accredited institution as determined by the US Department of Education
• Must be half-time for at least one academic period
• Must not have finished the first four years of college at the beginning of the tax year (and by definition – cannot be a graduate student)
• Must not be convicted of felony drug conviction at the end of the tax year

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Credit amounts for 2022 and 2023

Per eligible student

• You can get a tax credit for up to $2,500 to cover tuition, fees, and course materials for the tax year ($10,000 for 4 years)
• A tax credit is given for the 100% of the first $2,000 and 25% of the next $2,000 paid during the tax year
• If you owe no tax, you can get 40% or $1,000 refunded to you per calendar year.

What’s not covered

Expenses for transportation, dorm and living expenses, transportation, and medical expenses are eligible for AOTC credit.

Income limits to qualify for the AOTC

• Your modified adjusted gross income must be $80,000 or less for single filers and $160,000 or less if you are married and filing jointly
• You can get reduced credit if your modified adjusted gross income is over $80,000 but less than $90,000 for single filers (and over $160,000 but less than $180,000 for married filing jointly)
• No credit if your modified gross income is greater than $90,000 (singles) and 180,000 (married filing jointly)

Claiming the credit

You can claim the credit by filling out IRS Form 8863 and Form 1098-T, which you will receive from your school. You will need to provide your school’s employer identification number (EIN) on Form 8863.

You must file taxes to get the AOTC. This is the case even if your income is below the minimum standard income required to file income taxes.

Lifetime Learning Credit

The Lifetime Learning Credit is in some ways similar to the AOTC but there are also some key differences.

• First, you don’t need to get a degree to get the credit – a course to improve your job skills is eligible for credit.
• AOTIC can only be claimed for four years. There is no limit to the number of years you can claim the LLC.

Eligibility criteria

• A student must be enrolled at an eligible educational institution
• Must take a  higher education course (graduate, undergraduate or certificate courses). This includes courses to improve your job skills
• A student must be enrolled for at least one academic period  in the tax year

Credit Amount for 2022 and 2023

The maximum Lifetime Learning Credit is 20% of up to $10,000 in eligible expenses or $2,000. Eligible expenses include tuition costs, fees, books, and supplies required for taking the courses.

Income limits for 2022

The LLC starts phasing out at a modified adjusted gross income (MAGI) of $80,000 ($160,000  if you file jointly). At a MAGI of $90,000 ($180,000 for joint filers), you will not qualify for Lifetime Learning Credit

Claiming the credit

To claim the Lifetime Learning Credit, you have to fill out form IRS Form 8863. This credit is non-refundable – you cannot get a refund from the IRS if you owe no taxes.

Student loan interest deduction

You can deduct the interest you paid on your student loans from your taxes. This applies to students and parents who are in the process of paying back their loans. You can deduct the lower of $2,500 or the total amount of interest you paid during the tax year. This deduction is an above-the-line adjustment to your income, so you don’t need to itemize to take it.

Other criteria for student loan interest deduction

• You must have paid interest on a qualified student loan for the tax year
• Your MAGI is less than $90,000 (or $185,000 if filing jointly). The deduction is phased out gradually between MAGI of $75,000 and $90,000 for single filers (and $155,000 and $185,000 for joint filers)
• You will receive form 1098-E from the lender if you paid more than $600 in interest for the tax year. If you have more than one lender, you will receive multiple 1098-E forms.
• Filing status is not married filing separately

Qualifications to be eligible for Earned Income Credit

Earned income

You must have taxable earned income. Earned income includes your wages get by working for someone, income from your business, or the farm you own.

Here are the types of earned income

• Wages, salary, or tips (you get a W-2 at the end of the year)
• Income from a job where your employer didn’t withhold tax (such as gig economy work) including:
  • Driving a car for booked rides or deliveries (Uber, Lyft, etc.)
  • Selling goods online (Ebay, Facebook, etc.)
  • Providing creative or professional services
• Money made from self-employment, including if you:
  • Own or operate a business or farm
  • Are a minister or member of a religious order
  • Are a statutory employee and have income
• Benefits from a union strike

Earned income does not include:

• Pay you got for work when you were an inmate in a penal institution
• Interest and dividends
• Pensions or annuities
• Social Security
• Unemployment benefits
• Alimony
• Child support

Social security number required

To claim EIC, you  need a social security number for you, your spouse, and any qualifying child. The social security number must be

• Valid for employment
• Issued before the due date of your tax return
• Individual taxpayer identification numbers (ITIN) and Adoption taxpayer identification numbers (ATIN) are not accepted

Filing Status

Filing status can be any status except ” married filing separately”

Qualifying for EIC (with or without children)

You have qualifying children or you and your spouse (if filing a joint return)

• Meet all EIC requirements
• Cannot be claimed as a dependent or qualifying child on anyone else’s return, and
• Are between 25 and 65 years old on Dec 31st of the tax year

Qualifying children for EIC

Age

A qualifying child

• Can be any age and permanently and totally disabled at any time during the year
• Must be under the age of 19 at the end of the year and younger than you (or your spouse, filing a joint return)
• Under the age of 24 at the end of the year, be a full-time student, and younger than you (or your spouse, filing a joint return)

Relationship

A qualifying child must be

• Son, daughter, stepchild, adopted child or foster child
• Brother, sister,  half-brother, half-sister, stepsister or stepbrother
• Grandchild, niece or nephew

Residency

To qualify for EIC, your child must live with you (or your spouse, if you file a joint return) in the United States for more than half of the tax year.

Joint Return

You cannot claim EIC for your child if the child can file a joint return with another person.

Income limit thresholds for 2022

Maximum EIC credit amount for 2022

• $560 if you have no qualifying children
• $3,733 if you have one qualifying child
• $6,164 if you have two qualifying children
• $6,935 if you have three or more qualifying children

Must be US citizen or resident alien

To claim EIC, you and your spouse must be a citizen or a resident alien. If you or your spouse is a nonresident alien for part of the year, you can only claim EIC if you are filing jointly and you or your spouse is

• US Citizen with a valid Social Security number
• A Resident alien who was in the U.S. at least 6 months of the year you’re filing for and has a valid Social Security number

Investment income limitations

For 2022, your taxable investment income must be $10,300 or less

Foreign earned income limitations

You must not file Form 2555 and must have lived in the US for more than 6 months

Claiming both EITC and Child Tax Credit

It is possible to claim both EIC and Child Tax Credit in the same tax filing year as long as you meet the requirements for both.

Earned Income Credit is calculated on form 1040 automatically when you prepare your taxes. But you can use the IRS EITC Assistant to check if you meet all the criteria to get EIC for a given year.

If you have been using H&R Block or TurboTax, you can seamlessly move to another tax filing service.  FreeTaxUSA is free, has no income limitations, and will cover most tax situations.

Free and cheap tax Filing options

FreeTaxUSA

Federal tax returns are free at FreeTaxUSA.  If you file a free return, support is only by email and amendments are $15. You can pay $6.99 to get the Deluxe version which provides live chat support, unlimited amendments, and audit help. State returns are $14.99.

Here are some discount codes you can use to save money.
FREETAXUSA10 – 10% off
PROMOWIN – 25% off

The company behind FreeTaxUSA also has another website TaxHawk, which offers an identical service. Use discount code TAXHAWK10 for 10% off.

Cash App Taxes (previously Credit Karma Tax)

In 2020, Credit Karma Tax was sold to Square and became Cash App Taxes. Federal and state tax (limited to one state) filing is free through the app or online.

Note that you will need to download the Cash App to use the tax preparation service. Cash App Taxes has a list of forms and situations that it doesn’t support. 

Tax Act

Tax Act has four tiers

• Free version – W-2, Unemployment, Child Tax Credit, Earned Income
• Deluxe – Itemized deduction, student loan interest, 1099-INT/DIV, child & dependent care, HSA ($25)
• Premier – investments and property income, sale of home ($35)
• Self-employed – for freelancers, contractors, and business owners ($65)

AARP Tax-Aide

AARP Tax-Aide provides in-person and virtual help to anyone. There are no income limits, age, or membership limitations.

TaxSlayer

TaxSlayer offers multiple tiers of tax preparation service

• Simply Free – W-2, unemployment income, student loan interest
• Classic – Works for any tax situation. Includes all IRS forms, credits, and deductions. No restrictions. ($18)
• Premium – Includes priority phone and email support, live chat, and access to a tax professional ($38)
• Self-employed – for small business owners, contractors, side hustlers filing both a 1099 and a W-2 ($48)

Free Fillable Forms on IRS website

IRS has free fillable forms on its website. It works well if you have a simple tax return. It’s worth using software to check the work.

OnLine Taxes

OnLine Taxes offers free federal. State returns are $9.95. The website has a very simple interface similar to Cash App Taxes.

Free tax filing options with income restrictions

IRS Free File

IRS Free File is free for both federal and state taxes if your AGI is less than $72,000

VITA (in-person)

Volunteer based in person professional assistance or VITA,  offers free tax filing if your AGI is less than $58,000

VITA Virtual

Virtual VITA is free if your AGI less than $66,000

Why you should avoid using H&R Block and TurboTax for filing taxes

For years, H&R Block and Intuit have lobbied Congress to prevent the government from offering simple prefilled filing for taxpayers. This is for obvious reasons – the tax filing business is a cash cow for H&R Block and Intuit. The lobbying efforts of these companies have increased tax filing costs for millions of taxpayers.

Intuit has been telling its investors

We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future.

Bottom Line

There are several free and inexpensive options to file taxes. These tax filing options cost a fraction of what H&R Block and TurboTax charge. Since many products offer different features, choose a product that is appropriate for your tax situation.

Remember that there are no fees if you pay with a check, bank transfer, or money order. Given that, should you pay your taxes with a credit card?

Even with the 2% fees, there are several reasons why you should pay with a credit card as long as you pay your balances in full every month.

How to benefit by paying taxes with a credit card

Meet minimum spending requirements on a new card

Many credit cards require you to spend a minimum amount in the first few months to get the sign-up or welcome bonus. Paying taxes with that credit card is a good way to get those valuable miles or points.

Credit cards give you extra time to pay taxes

When you pay with a credit card you get about a month to make your payments. That can come in handy if you are managing a tight budget.  Remember that credit cards have high interest rates if don’t pay the balance in full by the payment due date.

0% APR offers

If your credit card offers 0% APR for a limited time, you can buy more time. Again, remember to pay your credit card bill on time to avoid high interest rates.

Deduct credit card processing fees

If you are paying self-employment or business taxes, credit card fees can be deducted as a business expense

Downsides of paying with a credit card

Fees

If you pay taxes with a credit card, you will pay fees. There is no way to avoid that. Even if you use tax software such as H&R Block and TurboTax, you will still pay the fees. In most cases, the fees charged by these software providers will be higher than what the IRS charges.

Interest payments can be high

If you are unable to pay your credit card in full, you will incur interest payments which can nullify any points or miles you gain by paying with a credit card.

Bottom Line

Paying taxes using a credit card can be profitable in certain cases. Even after paying 2% fees, you can come out ahead if you get credit card sign-up bonuses. If you have 0% APR on your credit card, you can get several months before you must pay the full amount. Just remember to pay your credit card bills in full when it’s due.

But if you have an S-corporation, you are responsible for paying both sides- that is you will be paying 12.4% in Social Security tax and 2.9% in Medicare tax. Here are a couple of things you should know.

• Social security tax is applied only on $142,800 in wages in 2021. If you make more than that, you will not pay Social Security tax for any income above that amount.
• Medicare has no income limit. But if you make more than $200,000, you will pay an additional 0.9%. Note that this additional 0.9% is the responsibility of the employee. Another way to put it, if you make more than $200,000 as an employee, you will pay 1.45% on the first $200,000 and 2.35% on any income over $200,000. As an S-corp owner, you will need to pay 1.45% Medicare taxes for the employer side and 1.45% or 2.35% for the employee side depending on your salary.

If you own an S-corp, you have the option to get paid in two ways  – salary and dividend distributions.

• For the salary portion, you must pay self-employment taxes (12.4% Social Security and 2.9% in Medicare taxes).
• For the dividend distributions, you don’t owe any self-employment taxes.

If you want to maximize your income, you will pay yourself 0% in salary and 100% in dividends. Unfortunately, this is likely to invite an IRS audit.

IRS states that

S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee.

Business owners often struggle with two questions.

• What is reasonable compensation?
• What is the right split between salary and dividend distributions?

First, remember that your business must generate a gross profit before you can pay yourself a salary or a dividend distribution. If your business is unprofitable, you cannot pay yourself.

But if your business is profitable, then you have to decide how much you pay yourself in salary and distributions.

Reasonable Compensation

One way to determine your salary is to look at the salary of similarly employed people.

• For example, if you make Youtube videos, find out how much it would cost if you hire someone to make videos for you. You will end up with a range – someone in New York City may charge $80,000 per year whereas someone in India might only charge you $20,000 per year. Pick a salary that you can explain in case you are audited.
• Another option is to look at the Bureau of Labor Statistics data and pick a median salary for a similar job

Split between salary and distributions

A ratio of 1:1 (also called 50:50 split) between salary and distributions is reasonable in most cases. That is if your business makes $50,000 in gross profits, you can pay yourself $25,000 in salary (subject to Social Security and Medicare taxes) and $25,000 in distributions.  If the ratio between salary and distributions is 1:10, in most cases it will raise eyebrows.

Consider your total salary

Your Social Security and Medicare taxes are based on your total income. If you have another job, your employer will pay half of Social security and Medicare taxes for that part of the salary.

Let’s say, you make over $142,800 in your full-time job, your S-corp salary will not be subject to Social Security taxes.

If you make $80,000 in salary at your full-time job, only $62,800 in salary from your S-corp is subject to Social Security taxes (you will pay 12.4% in Social Security taxes on just the $62,800)

As long as you have paid Social Security taxes up to the $142,800 limit, you are less likely to invite IRS scrutiny. If you have a business that generates a huge profit, you can consider a 1:2 or 1:5 split between salary and distribution once you meet the Social Security tax limit. Remember that you will still need to pay Medicare taxes on all your salary since it has no cap.

Bottom Line

Running a business is hard enough for business owners. If you own an S-corporation, you have some tricky decisions to make. Consult a CPA who has experience handling these questions. When in doubt, it is always best to take the conservative route.

Short-term capital gains vs Long-term capital gains tax

Short-term capital gains tax refers to a tax on the sale of assets held for 1 year or less, whereas long-term capital gains tax refers to a tax on assets held for more than 1 year.

Long-term capital gains

2022

The long-term capital gains tax rate is 0%, 15%, or 20% depending on your taxable income and filing status.

2023

Short-term capital gains

The short-term capital gains tax rate is your ordinary income tax rate (your tax bracket) as shown in the table below.

2022

2023

Exceptions

Tax laws are complicated.  Here are a few exceptions to the tax rates discussed above.

Net investment income tax

An additional 3.8% tax may apply to some people. The additional tax is applied to the smaller of your net investment income or the amount by which your adjusted gross income (AGI) exceeds the amounts below.

Increase your holding period

The tax rates of long-term capital gains are much lower than short-term capital gains. If you hold your stocks longer than 12 months, you will pay less in taxes.

Carry Over Losses

If you don’t have enough capital gains to offset your losses, tax laws allow you to carry the excess into subsequent years. There is a limit to how much you can deduct per year, but tax-loss carryover will reduce taxes.

Credit Karma Tax – Is it worth it?

100% Free Federal and State Taxes, No Gotchas

Instead of buying Turbo Tax or H&R Block software, you can use Credit Karma to file both federal and state taxes for free. There is no fee for e-filing either. Unlike some programs, there is no income limit at Credit Karma to file for free.

How does Credit Karma make money?

In life, nothing is free. There are always trade-offs. To file taxes with Credit Karma, you have to create a Credit Karma account by providing your name, Social Security Number, date of birth, and other personal details. Credit Karma makes money by advertising financial products and getting a commission if you buy the products it recommends.

Works With Most Forms, Not All

Credit Karma works for about 95% of scenarios. Some forms such as schedule K-1, non-resident tax returns (1040-NR), and Earned Income Credit with non-dependents are not supported. You can see the full list of forms not supported here.

Easy to Use, Mobile Friendly

Credit Karma is very easy to use and offers guides you step by step just like H&R Block and Turbo Tax. It is mobile-friendly but you can use it on a computer if you prefer that route.

You can take a picture of your W-2 and the software will enter your W-2 information in the software for you to verify.

If you used Turbo Tax or H&R Block last year, you can import them into Credit Karma and avoid re-entering your personal information and carry-over items from last year.

Users who have tried Turbo Tax or H&R Block and Credit Karma tax say that the results are comparable.

Where does Credit Karmax Tax fall short?

Credit Karma doesn’t have a good knowledge base for users to refer to, in case they have questions. H&R Block and Turbo Tax do a much better job in this area.

You get free audit defense, which basically means that Credit Karma will help you discuss your issue with the IRS. But it is not legal advice and you are on your own.

Recent Developments – Intuit acquires Credit Karma but Credit Karma’s Tax Business Sold To Square

In February 2020, Intuit, which owns Turbo Tax, Quickbooks, and Mint, agreed to buy Credit Karma for over $7 billion. As a condition for the acquisition, the Department of Justice required the divestiture of Credit Karma’s tax business. In November 2020, Credit Karma announced that it will be selling its tax business to Square, a financial services company known for its mobile payments.

It is unclear how Square’s acquisition of Credit Karma Tax will impact Credit Karma in the future. How will square monetize the tax business without the rest of Credit Karma, which is owned by Intuit?

One thing we know for certain. You can file your 2020 taxes for free.

Decent Trade-Off

Tax filing should be free. H&R Block and TurboTax have lobbied Congress for years to keep free tax filing just a dream because they make billions of dollars from their tax business. Credit Karma Tax is 100% free with no upselling but you do give up your personal data and privacy. So it’s not for everyone. If you are comfortable with how Credit Karma is monetizing your personal information, Credit Karma tax is worth giving a try.

Amazon has TurboTax Deluxe Federal 2023 + $10 Amazon gift card for $37 (download option)

Amazon has TurboTax Deluxe 2023 for $44. This includes federal and state tax returns. TurboTax Home & Business is also available for $75. Business edition is $144

Note – Amazon no-rush credits (digital rewards) can be used to purchase tax software

Prior Deals

NewEgg has great deals on H&R Block software.

H&R Block Deluxe – $14.99 (Use Code SAVHRB62)
H&R Block Deluxe + State -$17.99(Use code SAVHRB63)
H&R Block Premium – $27.99 (Use code SAVHRB64)

Target has TurboTax Deluxe 2022 Federal + State For $48

Amazon has great deals on Turbox software

TurboTax 2022 Deluxe  + $10 Amazon Gift Card (Federal Only) –  $36.99
TurboTax 2022 Deluxe + $10 Amazon Gift Card (Federal + State) –  $44.99
TurboTax 2022 Premier + $10 Amazon Gift Card (Federal + State) – $64.99
TurboTax 2022 Home & Business  + $10 Amazon Gift Card (Federal + State) – $75.99
TurboTax 2022 Business  + $10 Amazon Gift Card (Federal Only) – $113.99

Costco has $11 to $30 off Turbotax products.

Deluxe Federal+State – $11 off
Premier Federal + State – $18 off
Home & Business – $20 off
Business – $30 of

If you buy (TurboTax Deluxe + state) at Sams or Costco (cost – $55), you will get a $10 in-product for add-ons such as state e-filing or audit defense.

Amazon has TurboTax Deluxe (Federal Only) For $36.99

Amazon has Business Tax software (Federal Tax only)  for $113.99

Newegg has H&R Block Deluxe + State for $22.50 with code DCLBZA338 (the code gives you $12.50 off)

Newgg  has HR Block 2022 Deluxe + State(digital – PC) + $20 Starbucks gift card for $34.99

Newgg has H&R Block 2022 Deluxe (digital) for $17.49 ($24.99 minus $7.50 off with  promo code DCLBZA3294)

—–

Amazon has 50% off on H&R Block tax software

H&R Block 2022 Deluxe + State Tax  – $22.49
H&R Block 2022 Deluxe Tax – $17.49

When is the best time to buy H&R Block and TurboTax Software? How much should you pay?

Like everyone, I don’t like doing my taxes. I procrastinate as long as I can before starting my tax return. I have realized over the years that the best tax software deals and discounts are all gone by the time I sit down to do my taxes.

• When is the best time to buy H&R Block and TurboTax tax software?
• What price is considered a good deal?

Let’s take a look at two popular tax products on the market – H&R Block and Turbo Tax and how their prices varied over the 6-month period from November 2021 to April 2022 (for the 2021 tax products).  The prices I looked at were for the 2021 tax year. The price history data I looked at is from Camelcamelcamel.com, which tracks Amazon prices for a product over time.

There are other websites that sell these software products too. I have assumed that since Amazon is a marketplace with many sellers, if other websites drop prices, Amazon will too, at least most of the time.

Let’s take a look at the data.

H&R Block

I looked at the price of the H&R Block Deluxe version since that seems to be the most widely used version.

H&R Block Federal Deluxe (no state tax included)

Lowest price – $17.49
Date of the lowest price – Nov 30, 2021

H&R Block Federal Deluxe + State Taxes

Lowest price – $22.49
Date of the lowest price – February 7, 2021

TurboTax

I looked at the price of the TurboTax Deluxe version since that seems to be the most widely used version among TurboTax products.

TurboTax Federal Deluxe (no state tax included)

Lowest price -$29.80
Date of the lowest price – January 20, 2021

TurboTax Federal Deluxe+ State

Lowest price – $39.99
Date of the lowest price – December 26, 2021

Conclusion

Taking a look at the data from 2021 tax season, it is clear that you should buy early. There are no good deals in March or April when most people are busy doing their taxes. The best deals are between November and January. Another thing that stands out is that TurboTax is priced significantly higher compared to H&R Block for a similar tier of software.

Non-profits are doing an amazing job during this difficult time. But recent changes in the tax code have disincentivized charitable contributions.  The Tax Cuts and Jobs Act (TJCA) that was passed into law in 2017 nearly doubled the standard deduction and eliminated or limited many itemized deductions.

Since many taxpayers don’t itemize anymore because of the high standard deduction, the after-tax cost of donating to charitable causes has gone up by around 7%.  Not surprisingly, charitable giving has gone down. If you are a non-profit, the timing could not have been worse.

CARES Act – $300  Charitable Contribution Deduction For 2020 and upto $600 for 2021

The CARES and the 2nd COVID relief bill aim to solve this problem and provide an incentive for people to make a charitable contribution. In 2020, you can contribute up to $300 (for both individuals and filing jointly with spouse)  and in 2021, you can contribute up to $600 if you are married and filing jointly, to a non-profit and deduct your contribution even if you don’t itemize. You can still claim your standard deduction. The charitable contribution will ultimately reduce your tax bill. You must make your charitable contribution by December 31, 2020, to claim this deduction on your 2020 taxes. Note that these contributions must be cash contributions and not car, clothing, food, or furniture.

Be Informed About The Non-Profits You Contribute Money To

Before giving any money to a non-profit, check out the following two websites to understand if your non-profit spends its money as it claims.

Charity Navigator
Guidestar

Look for non-profits that spend more than 80% of their funds on program expenses.  Administrative and fundraising expenses should be a small portion of the expenses.

The form you need to fill out to file an extension is IRS Form 4868.  The good news is that the IRS will not ask you the reason for requesting an extension. IRS will only contact you if your request for extension is denied. Data shows that IRS approves 97% of extensions.

In order to get the extension, you will need to estimate your taxes for the prior year, enter your total liability and file the extension by April 15.

The extension will give you six extra months to file returns – you can file your returns by October 15 instead of April 15.  Remember that the extension is only to file taxes.  If you owe any taxes,  you must still pay the taxes by the original due date.  Otherwise, the IRS will assess late payment penalty and interest charges.

How You Can File Extensions For Free

Free E-file at IRS.gov

IRS Free File website allows you to e-file your extension for free.  The forms are easy to fill out and can be completed online.  The IRS Free File website allows people who make less than $69,000 of adjusted gross income to file taxes for free, but anyone – even people with income over that threshold can use this website to file an extension for free.

Use Tax Software

Whether you use tax software such as H&R Block or TurboTax, or an online tax preparation website such as TaxAct, you can use the same software or service to file an extension.  One benefit of using your usual program is that it keeps all your tax data in one place and keeps everything organized.

FreeTaxUSA

FreeTaxUSA allows you to file Form 4868 online for free.  There is a dedicated link in their primary menu for extension requests.

TaxACT

At TaxACT.com, you can file federal tax extension for free. You don’t need to use them later when it is time to file taxes although you can use them to file taxes as well.

Overseas Tax Payers and Military Members

If you live overseas, you automatically get two additional months to file taxes. If you need more time, you can file for an extension.

Some military members also automatically get extra time to file taxes depending on where they are posted and what they are involved in.

People affected by natural disasters also automatically get more time to file taxes.  Check the IRS website for a list of qualifying disasters.

Bottom Line

If you need additional time to file taxes, you can easily file for an extension directly through the IRS Free File website or by using tax programs.  You will still need to pay your taxes by the due date but the extension gives you additional time.  This will particularly help people who run businesses or those who have complex tax returns.