Tax season is here and that has many people scrambling to get their paperwork in order and ready to file. The deadline to file your taxes this year is April 18, 2022. While that may seem like plenty of time to get everything in order, some people just need more time.
If you think you fall into this category, there are some things you should know so that you don’t get on the IRS’ bad side.
What Does a Tax Extension Do?
Some people assume that when they seek a tax extension, it will give them more time to pay what they may owe. But, filing an extension only gives you more time to finish your paperwork. Any money due is still expected on the tax deadline, which in this case is April 18th.
If you think or already know you’re going to have to pay the IRS, it’s best to estimate your tax liability and pay the amount when filing Form 4868. If you’re not going to owe anything and are expecting a refund, you don’t have to worry about much when filing an extension. Of course, the longer you take to file, the longer it’s going to take for your refund to arrive.
Is There Any Way to Extend the Tax Payment Deadline?
The IRS gives two special circumstances where you can extend the tax payment deadline. If you are a U.S. citizen or resident alien and on the date your taxes are due you are living outside the U.S. and Puerto Rico and your main place of business or post of duty is outside the U.S. or Puerto Rico, you may be able to get an extension on paying your taxes. Another circumstance would require you to be on duty outside the U.S. and Puerto Rico for military or naval service. You must attach a statement to your return explaining the situation that qualifies you for the extension.
You will automatically get an extension for filing and paying taxes if you are serving in the armed forces in a combat zone or have qualifying service outside of a combat zone. If you are serving in the Armed Forces on deployment outside the U.S. away from your permanent duty station while participating in a contingency operation, you will also receive an extension.
Can You File a Tax Extension Online?
Since basically everything can be done online these days, many people seek to file their tax extension this way. You can file an extension electronically by using Free File through the IRS to make your request. This gives you until October 15th to file a return. You should also estimate your tax liability when doing this and pay any amount due. If there is an overpayment, you will receive a refund once all your paperwork is complete.
You can also visit a tax preparer, like the experienced team at Steward, Ingram & Cooper PLLC, to file the extension for you.
Will I Get Penalized for Filing an Extension?
There is no penalty for filing an extension. But, if you’re late to pay money owed or choose to not pay at all, you can expect to be penalized. If you don’t pay the entire amount owed, the IRS will charge you interest on the unpaid balance until the full amount is paid.
You may also get a late payment penalty if you don’t pay at least 90% of what you owe. The penalty usually amounts to half of 1% of what is owed, up to a maximum of 25%. If you don’t file your return or an extension by the deadline, you will get a late filing penalty. This will amount to 5% of what you owe for each month, up to a maximum of 25%.