Sometimes that April tax deadline sneaks up on you. Do you need a bit more time to get your family’s W-2s, 1099s and 1040s in order? Let’s break down the basics of tax extensions.
When Is the Tax Extension Deadline?
Each year, the deadline to file a tax extension application will change, so make sure to check the IRS website for an accurate date. There are a few exceptions, though. People living or working abroad on tax day and military members in combat zones or living abroad may qualify for automatic extensions. Those affected by natural disasters may also receive automatic extensions and tax relief.
How Do I File a Tax Extension?
You’ll need to submit Form 4868 electronically or by mail. You can use IRS Free File or a tax preparation software, or enlist the help of a tax professional to request an extension.
Once you’ve submitted it, be sure to check your federal application status. If you use TurboTax, you’ll receive a confirmation receipt within 48 hours. Or you can call the IRS (800) 829-1040 for individuals, (800) 829-4933 for businesses) to confirm your status. You should also check your state income tax extension rules.
Applications may be rejected for misspellings, numerical typos and personal information that doesn’t match what you’ve previously filed.
What Happens When You File a Tax Extension?
If your request has been granted, you usually have until later on around mid-October, to file your tax return. To be sure to check the IRS website for all deadlines since they will vary each year. However, it is not an extension for your tax payment.
The extension to file essentially gives you more time to get organized and gather necessary tax documents. This is also a helpful option if you’re missing a 1099 or know information will need to be amended.
But regardless of your reason for extending, you’ll need to estimate your tax balance and pay it by the deadline. If you don’t pay your taxes after filing for an extension, you’ll be on the hook for a penalty and interest, plus your initial amount owed.
The penalty for not paying your tax balance is .5% per month, with a maximum of 25% of your unpaid payment. You’ll also be charged interest — 3% plus the federal short-term rate. This interest is compounded daily. Even if you can’t pay your entire balance by the April deadline, it’s smart to pay as much as you can to avoid more fees. You’ll also face a penalty if you fail to file your taxes by the extension deadline.
If you need an extension but anticipate a tax refund instead, you don’t need to worry about these payment penalties.
How Do I Pay Taxes After Filing an Extension?
First, you’ll need to estimate your tax liability using the Estimated Tax Worksheet on Form 1040-ES or a tax preparation software. Make payments using the IRS website, which outlines your previous tax payments by year. If you are unable to pay your entire balance at once, you can also apply for a payment plan.
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