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Taxes are due in about a month. While an extension will buy you more time to file them, it won’t give you extra time to pay. Learn more here. [[{“value”:”
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At this point, there’s still a decent amount of time to file your taxes ahead of this year’s April 15 deadline. But what if you’re really behind, you haven’t yet lined up any tax help, and you just don’t see a way to get your return completed by mid-April?
One thing you should know is that if you don’t owe the IRS money, but rather are due a refund, you won’t face a penalty for being late with your tax return. In that situation, being late with your return will delay your refund from hitting your bank account. Since that doesn’t hurt the IRS ( if anything, it benefits it), there’s no added penalty imposed.
However, if you owe the IRS money from 2023 and are late submitting your return, then you could face a steep penalty for submitting your taxes late. The failure-to-file penalty amounts to 5% of your unpaid tax bill for each month or partial month your return is late, up to a total of 25%. That could amount to a lot of money.
That’s why it’s important to request a tax extension if you’re behind on your taxes and don’t expect to be done by April 15. But it’s also important to understand how tax extensions work.
You get more time to file — not more time to pay
If you request a tax extension by April 15, the IRS will give you six more months to submit your return. And don’t worry — you don’t need to come up with an excuse along the lines of “My dog ate my tax return.”
When you request an extension, you don’t have to give a reason for needing more time. You just have to ask for more time.
That said, a tax extension won’t give you extra time to pay your tax bill. It’ll get you out of the failure-to-file penalty, but it won’t exempt you from the late payment penalty the IRS imposes for tax bills that are submitted after April 15.
The late payment penalty is equal to 0.5% of your unpaid taxes for each month or partial month your payment is late. Clearly, it’s considerably smaller than the failure-to-file penalty, but the late payment penalty also maxes out at 25% of the sum you owe. So all told, it’s not a good thing to let an IRS tax debt drag out.
Try to pay on time either way
If you’re going to ask for a tax extension, one thing it definitely pays to do is try to estimate what you owe the IRS and pay that sum by April 15. Tax software can help with this. Let’s say you estimate your tax debt at $2,000 and pay that sum when, in reality, you discover once you actually complete your tax return that you owe $2,500. In that case, you’ll only face a late payment penalty on the $500 you didn’t submit, thereby minimizing the damage.
All told, you may end up needing more time to finish your taxes this year, and that’s not necessarily something to panic over. But make sure you understand how tax extensions work. And make sure to request that extra time on or before April 15. Beyond that, you can get flagged and penalized for being late.
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