Sometimes situations occur when you might not be able to pay your taxes by the deadline. While there isn’t a penalty just for filing an extension, there are fines you might face for not paying on time.
Filing a tax extension is free, and must be done by the date your taxes are due. Once you file the extension, you have until October 15 to finish your return.
The extension is just for filing. Tax payments must still be made on time. If you are unsure of how much you will owe, submitting an estimated payment by the tax deadline will reduce your chances of late fines. If you underpay, you can still be penalized for the difference in amounts.
IRS Penalties for Late Filing or Payments Include:
- Interest on the unpaid balance until paid in full.
- Late filing penalty if the IRS doesn’t receive your return or IRS Form 4868 by the deadline. This is usually 5% of the amount you owe each month. The maximum penalty is 25%.
- Late payment penalty accrues if you pay less than 90% of what you owe. You might face a percentage fine of the amount you owe each month, also to a maximum of 25%.
The late filing penalty is only if you fail to file an extension by the tax deadline. It is important to make sure you submit your extension, and that it is accepted.
Most filing extensions are approved automatically, unless there is information missing. If you want to confirm the IRS received your extension request and that they approved it, you can call the IRS.
In addition to applying for a filing extension, you can also apply for a delay in paying your taxes. However, you will face late payment penalties and fees for facilitating the delayed payment process.
It is also important to check your state tax laws. Some states require you to file a separate extension.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
