Filing a tax extension may be the answer for you if you fell behind on your tax calculations this year, but be aware that the date change only applies for tax returns, not for the payment.
This is a great tool for those that couldn’t find the time to do the needed accountings. Here are some other details you should know about filing a tax extension:
Payment options
Although (and for most) the main problem is usually the lack of resources to front our obligations, there are other alternatives for differing your tax payment, although these are subject to penalties, the fees are less than the non-payment fine.
- Set up an installment payment plan with the IRS.
- Request a short payment extension (60-120 days)
What to file?
To request a file extension you have to file Form 4868 to the IRS before this year’s federal tax deadline (April 18, 2023).
How much extra time will you get?
Tax extensions are usually about 6 months time, for 2022’s statement, your new deadline will be on October 16th 2023.
Why would you file an extension?
Among the different reasons to request an extension, here are some that Uncle Sam find adequate:
- Incomplete tax documents
- Unexpected events (illness, death in the family, natural disasters, etc.)
- If you’re a military member abroad
- Converting to a Roth IRA (when you switch from a traditional IRA to a Roth IRA, there are taxes you have to pay)
- An overbooked accountant (it gives more time for your accountant to get you the best refund possible)
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Penalties for not paying your taxes on time
These are some of the penalties the IRS may charge you if you don’t pay your taxes on time:
- Failure-to-file: If you don’t request an extension before the deadline, and you file your statement late, you’ll earn a 5% penalty of the unpaid taxes for each month (or portion of the month) that you are late. The penalty will not exceed 25%.
- Failure-to-pay: If you file your taxes on time but don’t pay, you may be subject to 0.5% penalties of your unpaid taxes for each partial or full month you are late.
More details about those penalties
- If both the non-filing and non-payment penalties are due in a given month, you may not pay more than a 5% penalty.
- If you file your tax return more than 60 days after the due date or the extended due date, the minimum penalty is $435 or 100% of the unpaid taxes, whichever is less.
- You will be charged interest on the unpaid amount at the federal short-term rate plus 3%.
- You can avoid penalties if you can show good cause (such as illness, fire, or natural disaster) for not filing or paying on time. You must provide proof of good cause to the IRS.
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