Worried You Won’t Get Your Taxes Finished on Time? Here’s What to Do

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There are two crucial moves to make in this situation. 

At this point, we’re inching closer and closer to the April 18 tax-filing deadline. If you’re 95% done with your taxes, you’re in pretty good shape. But if you’re hovering around the 30% mark, well, let’s face it — things aren’t looking as good.

Being late with a tax return could have serious financial consequences. So if you really don’t think you’ll be done with yours by April 18, it pays to request an automatic extension. But that’s not the only move you should make.

Get yourself that extra time

When you’re late with a tax return and you’re due a refund, there’s no specific penalty for submitting your taxes past the deadline. The logic is that the longer it takes you to file your return, the longer the IRS gets to hang onto your refund rather than transfer it into your bank account. That only hurts you.

But if you owe the IRS money, filing a tax return late could cost you a lot of money. You’ll be hit with a failure to file penalty equal to 5% of your unpaid tax bill for each month or partial month your return is late, up to a total of 25%. So as an example, if you owe the IRS $2,000 and are 24 days late with your tax return, you’ll be penalized 5% of that $2,000, or $100.

That’s why you should always request an extension if you’re running into the tax-filing deadline and don’t think you’ll make it. An extension will give you an extra six months to file your taxes without facing the failure to file penalty.

Estimate your tax bill — and pay it by April 18

A tax extension will give you more time to submit your tax return, but it won’t give you extra time to pay your tax bill. So if you know you won’t make the deadline, do your best to estimate your tax payment owed, and send the IRS that money by April 18.

If you’re late paying a tax bill, you’ll be charged a late payment penalty equal to 0.5% of your debt per month or partial month your return is late, up to 25%. You’ll also start to accrue interest on your unpaid taxes.

Clearly, this penalty is much lower than the failure to file penalty. But it’s one worth avoiding regardless.

Now, you may be thinking, “If I don’t have my tax return ready by April 18, how will I know how much to pay?” That’s why your best move is to estimate your bill based on what you do know. If you wound up owing the IRS $2,000 last year, and your income increased slightly this year without having more tax withheld along the way, you may want to send the IRS $2,500 in case your tax bill is higher.

All told, it’s generally best to get your taxes done on time — whether you’re due a refund or have to write the IRS a check. But if that ship has basically sailed this year, your next best move is to file a tax extension and send the IRS some amount of money if you’re convinced you’re going to owe.

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