Filing A Tax Extension: All The Money You’ll Delay If You Do
You still have months left to file your taxes, but if you plan to file a tax extension, you could be delaying a significant amount of money.
Katie Teague
Associate Writer
Katie is an Associate Writer at CNET, covering all things how-to. When she’s not writing, she enjoys playing in golf scrambles, practicing yoga and spending time on the lake.
Laura Michelle Davis
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Laura is a professional nitpicker and good-humored troubleshooter who has worked as an English teacher, Spanish medical interpreter, copy editor and proofreader. She is a fearless but flexible defender of both grammar and weightlifting, and firmly believes that technology should serve the people. Her first computer was a Macintosh Plus.
Filing for an extension gives taxpayers extra time, but there are some consequences to be aware of.
The IRS expects the 2021 tax season to be hectic this year since they’re still dealing with a backlog of tax returns. That’s why you shouldn’t wait too long to file your taxes. But if it’s not possible to submit your taxes by the April 18 deadline, we understand — however, you could be delaying a lot of money that’s owed to you.
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Can You Request An Extension To File Your Taxes
If you know that youre going to miss the due date for your taxes, you should try to request an extension from the IRS and your state tax-filing agency.
Taxpayers can request an extension no matter how much they earn. If you do so, you have until October 15 to file your federal tax return.
However, a tax-filing extension does not absolve you of your tax liabilities. For instance, let’s say that you owe money to the IRS based on the income you earned in 2021. The United States operates on a “pay-as-you-go” tax-filing system. So, you are required to pay your balance owed by April 18, even if you don’t actually file until October 15.
If you dont make payments on time, you may be subject to penalties. So while a tax extension gives filers extra time to file their paperwork with the IRS, it doesnt give them an extension of time on their tax bill.
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Filing Your Taxes Late
Filing your tax return late can be a costly task. Delayed submission may result in negligence penalties and a late payment penalty. Many taxpayers file their tax returns on time, but there is no need to postpone them until the very end. Early tax returns make sense for many reasons.
Starting the filing process early in the year will allow you to collect the evidence needed to claim all deductions and avoid the headache of highlighting numbers and receipts late at night.
Earlier in the season, your tax preparer has a more flexible schedule and may be able to start working immediately with your account.
The earlier you file, if you’re entitled to a refund, the sooner you have the money you loaned the government back in your pocket. The IRS doesn’t pay you interest.
But if you owe Filing even just one day late will incur penalties and interest.
It is important to remember that paying your tax returns late has consequences. Each month you are late for tax payment, you will have to pay an additional 5% penalty on the total amount you owe. It is also important to note that one month does not mean 30 days for the IRS.
Submitting more than 60 days late makes things more complicated and more expensive.
If you cannot pay the total amount you owe at the time of filing, pay as much as you can and apply for a tax payments plan with the IRS.
What To Do If You Havent Been Filing Taxes
Get caught up! This is truly the only answer, because running from the IRS only causes penalties, costs, and headaches to go up. Whats more, the IRS wont approve you for any debt relief if you owe late taxes.
The good news is that you most likely will be able to work out a payment plan or relief option as long as you get current with missing tax returns. If you have a valid reason for not filing your taxes,penalty abatement may be available.
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How Can The Irs Find Out About Unreported Income
The IRS has a number of ways of finding out about unreported income. The main way is the 1099-NEC and 1099-MISC forms they collect for informational purposes. If the IRS gets a form and sees you didnt report that income, they will usually send you a letter asking for an explanation.
The IRS can also find income you didnt report if something else triggers an audit. For example, they might request your bank statements and see deposits for the income you didnt report.
What If You Dont Ask For An Extension
If you have not applied for an extension of time and expect to pay the IRS, the agency will collect unsubmitted and fine non-payment fees after the tax deadline. If you do not submit a penalty or default penalty, it will be 5% per month . The upper limit is 25%.
60 days after the tax date, even if you only owe $1, the IRS will impose a fine of at least $135.
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How Long Can You Wait To File Taxes If You Dont Owe
Among the individuals the IRS requires to file a tax return are those who have close ties to wealthy people. While you dont need to file tax returns if you dont owe anything or receive a refund if your income is below the minimum income level. If you want a refund, you must file within three years of the due date.
Does The Irs Ever Negotiate The Amount Owed
Under certain circumstances, the IRS is authorized to resolve a tax liability by accepting less than full payment. An “offer in compromise” is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt. There are three circumstances under which the IRS is authorized to compromise:
Form 656: Offer in Compromise Package should be completed to file an Offer in Compromise with the IRS. Included with the Form 656 package are Form 433-A, Collection Information Statement for Wage Earners & Self-Employed Individuals and Form 433-B, Collection Information Statement for Businesses.
- You may need to complete the appropriate Form 433 and should be prepared to provide other documentation and explanations as they are requested.
- Various options are available for accepted Offers in Compromise requests, such as a reduced total payment and scheduled monthly payments.
- Defaulting on an accepted offer in compromise can result in the IRS filing suit against you and reinstatement of the original tax debt, plus interest and penalties.
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What Should I Do If I Miss The Tax Deadline
Fill out your income tax return exactly as you would typically do. Then enter your W-2, 1099, or other income and tax reporting forms into TaxSlayer. The only thing that might be different from filing during tax season is the fees you will owe if you do not file for an extension.
See a list of documents to have on hand when you file.
When Is My Tax Return Considered Late
Your tax return is due on the tax filing date. For most years, the filing date is April 15. If you filed an extension, you have an additional 6 months to file your taxes, generally until October 15. Any return that is postmarked or electronically filed a day or more past the due date is subject to interest.
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Can I Still File My Taxes After The Deadline
Yes, you can still file after the deadline. However, you will incur two penalties. The IRS levies a failure-to-file penalty, which is 5% of unpaid taxes every month, and an inability to pay penalty, which amounts to .5% of total delinquent taxes.
As you can see, paying taxes late is actually cheaper than filing taxes late. A good way to save money from penalties is to ask the IRS to give you a tax extension. You can easily register for an extension with their e-file system. The IRS has tax extension guidelines for those who want to file for an extended filing period. Tax filing extension is usually six months. The extension goes a bit beyond that for the likes of military personnel in active duty.
What Happens If I Miss Tax Deadline
Unless otherwise specified, the IRS will fine you 5% of your unpaid taxes per month if you fail to file by the due date, or 25% if filing by the due date is late. The IRS charges a monthly fee if you fail to pay your tax. Between 5% and 25% of your income should go toward this. Over 50% of your income can be subject to penalties.
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Is It Too Late To Pay Estimated Taxes For 2020
Technically speaking, the 2020 due date for quarterly estimated taxes has long since passed. The last one was January 15, 2021 – so, if you missed that one, you’re too late to pay your estimated taxes in their normal circumstances.
The key phrase here is “normal.” While you are too late to pay the sum that you originally owed, you are not too late to pay your taxes overall. You’ll just have to pay the tax along with the penalty.
The more you put the tax payment off, the bigger your penalty will become. This is why you need to make your estimated quarterly payment as soon as you remember it.
What Happens If Tax Return Is Overdue
Late return / activity statements for individuals, small businesses, and large corporations typically require a FTL of up to $900, as opposed to $4,500 for smaller businesses. Also if taxes are due due but the tax return is unpaid, a General Interest Charge may be applied, typically at a rate of GIC plus 6-10% per year.
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Sign Up For A Payment Plan
If you need more time to repay your unpaid tax balance, you can file a request for an extension and then apply for an extension. There are different costs tied to establishing an installment plan.
A formula exists that considers your particular circumstances and determines the cost.
Riley Adams is a licensed CPA who works at Google as a senior financial analyst. He owns the investing website, Young and the Invested , which teaches younger generations how to invest with confidence.
- Riley Adams
Ask For An Offer In Compromise
In certain situations, the IRS will accept less than the full amount of tax due. This is referred to as an offer in compromise. These situations include:
if theres doubt that the amount due is accurateif theres doubt that the tax could ever be paid in fullif the IRS determines that payment would result in economic hardship or be unfair
Request the Form 656: Offer in Compromise Package to learn more about offers in compromise.
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Get Help With Your Taxes Today
Not filing taxes is a guaranteed way to owe more money to the IRS. In addition to incurring all of the consequences of not filing taxes, youre also shutting yourself off from IRS debt relief that will help you get this problem off your back. At Tax Group Center, weve been working with the IRS to manage or reduce tax debt for more than 30 years. Let our team help you reach an agreement with the IRS if youre behind on taxes. Asolution is waiting. Reach out today!
How Far Back Can You File Taxes And Get A Refund
You can get your tax refund as long as you file your tax return within three years of its original due date. Once that three-year window has passed, you cant get your tax overpayment, nor can you take advantage of any credits you would have been eligible for.
For example, if you never filed your taxes in 2017 but were owed a tax refund, you lose the opportunity to collect this refund in 2021.
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Why File For An Extension
Filing an extension automatically pushes back the tax filing deadline and protects you from possible penalties. Late-filing penalties can mount up at a rate of 5% of the amount due with your return for each month that you’re late.
- For example, if you owe $2,500 and are three months late, the late-filing penalty would be $375. x 3 = $375
- If you’re more than 60 days late, the minimum penalty is $100 or 100% of the tax due with the return, whichever is less.
- Filing for the extension wipes out the penalty.
TurboTax Easy Extension is a fast and easy way to file your extension, right from your computer.
Large Tax Deficiency And Negligence Penalties
When there is an understatement of taxable income equal to 25% or more of gross income, the 25% large individual income tax deficiency or other large tax deficiency penalty will be assessed. When the percentage of understatement of taxable income is less than 25%, the 10% negligence penalty may be applied. The application of the 10% negligence penalty is based on the understatement of tax and will be made on the basis of the facts in each case. When the accuracy penalty has been assessed for federal income tax purposes, the 10% negligence penalty will be assessed for State income tax purposes, unless the 25% large individual income tax deficiency or other large deficiency penalty applies.
A large tax deficiency penalty or a negligence penalty cannot be assessed when the fraud penalty has been assessed with respect to the same deficiency.
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Pay It In Installments
Youll attach IRS Form 9465 to your tax return to request an installment agreement and monthly payment plan for the payment of your taxes. If you owe more than $10,000, the IRS may want to review your personal finances before agreeing to a payment plan.
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The IRS will charge $31 to set up the payment plan if payments are direct debited, or $149 for non-direct debit payments. The interest rate charged on late payments is currently 3% and theres also a late payment penalty of 0.5% per month.
Will My Refund Be Late If I File A Tax Extension
Yes. The timeline for getting your income tax refund depends on when you file. And although you have until Oct. 15 to submit your return if you file an extension, it doesn’t mean you have to wait that long to file.
The IRS is still experiencing delays due to the pandemic and has a backlog of unprocessed returns, so in some situations, it could take much longer than the average 21 days to issue refunds. Some refunds, especially for more complicated returns or those that need corrections, could take months to arrive.
The IRS is asking taxpayers to file electronically this year and to carefully review their details before submitting to avoid any errors that could potentially delay their refund. The agency also asks that you to get your money faster.
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What Happens If I Owe Payroll Taxes
The Possible Consequence of Unpaid Payroll Taxes When you fail to settle your back-payroll taxes, you could be imprisoned by the IRS. The IRS can also heavily fine you, including an assessment of penalties up to 33 percent of what you already owe. In the worst-case scenario, you might lose your business entirely.
When Is My Tax Return Due
The federal tax filing deadline is April 15, unless that date falls on a holiday or weekend. However, the IRS has previously adjusted due dates because of the pandemic.
If youve been taking advantage of the extended filing times in previous years, be sure to pay attention to the tax deadline this year.
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