And What Are the Consequences?
The most important thing to know about filing a tax extension is not how it’s done. The most important thing to know about filing a tax extension is what it’s actually extending … because it’s probably not what you think.
The most important thing to know about filing a tax extension is lost in the verbiage of tax Form 4826, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Let’s examine what that means.
A Tax Extension Is for Filing Your Income Tax Return.
A tax extension gives you extra time to complete and file your tax return.
A Tax Extension is NOT for Paying Your Income Taxes.
A tax extension does NOT give you extra time to pay your income taxes. There is NO extension for paying your income taxes. In other words, there is NO option for extending the time you have to pay Uncle Sam the full amount of income tax you owe.
Answers to All Your Other Tax Extension Questions
Who can file for an extension?
Anyone can file a tax extension.
When is the deadline for filing an extension?
The deadline to file for a tax extension is the day tax returns are due, which is usually on or around April 15.
How much does it cost to file for an extension?
Filing for a tax extension is free.
How do I file for a tax extension?
Complete and submit Form 4826, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return by mail, use IRS Free File to request an automatic tax-filing extension online, or make a full or partial electronic payment of your estimated income tax due and indicate the payment is for an extension.
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To avoid penalties and interest, pay your tax liability in full when you file for the extension.
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To avoid penalties only, pay 90% of your tax liability when you file for the extension and pay the remaining balance by October 15 when you file your tax return. You will still be charged interest on the outstanding balance until it is paid in full.
When does the tax extension end?
You must complete and file your tax return by October 15 of the year during which you have filed an extension.
Are there any negative consequences for filing for an extension?
There are no penalties or interest charged when you file for a tax extension if you pay all your income tax due by April 15. If you pay 90% of the tax you owe, either from withholding, estimated tax payments, or payment submitted when filing for the extension, there is no penalty if you pay the rest in full by October 15 when you file your tax return. However, you will still be charged interest on the remaining balance until it is paid in full.
Key Takeaways:
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There is no extension for paying the income tax you owe by the April 15 deadline. There is only an extension for filing the return. The deadline for that extension is October 15 of the same year.
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You MUST pay your taxes in full by April 15 or incur penalties and interest. The only way to avoid a penalty is to pay 90% of the taxes you owe when you file the extension and pay the remainder by October 15 when you file your tax return. You will still be assessed interest on the outstanding balance until it is paid in full.
Avoid Owing More Than You Can Pay When You File for a Tax Extension
If you are a regular employee, your employer withholds federal income tax from your pay to offset the amount of income tax you owe at the end of each year. Your employer determines the amount to withhold based on your responses on Form W-4, a document you likely completed when you started your employment.
Review your W-4 at the start of each year or whenever your financial situation changes to ensure your employer is not withholding too little from your income.
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Calculate the right amount of withholding from your regular employment by claiming the correct number of dependents on your W-4.
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Request extra withholding on your W-4 if you know you will be receiving other income (e.g., interest, dividends, retirement income).
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Pay quarterly estimated taxes on self-employment income by filing Form 1040-ES even if you also have regular income from an employer.
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Use the Tax Withholding Estimator at irs.gov to determine if you should increase or decrease your withholding.
Key Takeaways:
You have control over the amount of income tax withholding your employer takes from your check each pay period. Increase or decrease your withholding to ensure you don’t owe more income tax than you can pay when you file your tax return or tax extension.
If you have additional questions about filing a tax extension or how to avoid owing more taxes than you can pay when you file your taxes, schedule an appointment with a tax professional at AMG Finance. Our knowledgeable tax preparers are here to help you understand your income taxes any time of the year.
