The Internal Revenue Service gave taxpayers a few extra days this year, but the tax deadline is almost upon us, whether you’re ready or not. And a lot of people won’t be.
Fortunately, the IRS is happy to offer you an extension. Unfortunately, it’s just for the paperwork. It wants any taxes you might owe now. Confusing? It can be. Here’s a look at the ins and out, as well as how to file an extension.
How do I file a tax extension?
The quickest way is via Free File, where you can electronically request one, which will extend your filing date until Oct. 16. (Tax software from TurboTax, e-File and H&R Block can also file the request.)
You can also file via mail using Form 4868 or via your tax professional.
Who can file for a tax extension?
Anyone can file an extension, but some people, in areas that have been hit by severe storms, don’t need to.
The Internal Revenue Service announced earlier this month that storm victims in Arkansas will have until July 31 to file their returns (for both individuals and businesses). That follows earlier announcements that storm-affected people in Mississippi will also have until July 31 to file and that New Yorkers who got slammed with severe winter storms have been given until May 15 to file their returns. People impacted by natural disasters in California, Alabama, and Georgia were given a new filing deadline of Oct. 16 in February.
What do you mean I have to pay my taxes now?
You will need to estimate your tax liability, even if you haven’t calculated it. And you’ll have to pay any owed taxes on that estimate by the regular deadline, April 18.
What happens if I pay my taxes late?
There are two kinds of fees and penalties that could be assessed on top of any taxes you might owe—one for filing late and another for paying late. If you file your return more than 60 days late, you’re likely looking at a minimum penalty of $210 (unless you owe less than that—in which case the penalty is 100% of the unpaid tax). Otherwise, the penalty can be as much as 5% of the unpaid tax each month up to a maximum of 25%.
Late payment penalties are generally 0.5% of the unpaid tax per month, though that can build to as much as 25%. (The amount is cut considerably if you work out a payment agreement with the IRS.)
I can’t pay my taxes now, but I’ve always done so in the past. Does that get me any leniency?
If you historically have filed on time, you might qualify for the First Time Abatement program, which will help you avoid any fees. Check with your tax preparer or the IRS.