What Is a Tax Extension?
Tax season can be one of the most stressful times of the year for most Americans, but it doesn’t have to be ― especially not when you can get an extension and buy yourself some additional time to file.
The deadline to file taxes is April 18 in 2017, but if you’re just not ready to file right now (maybe you’re missing a few forms or you just ran out of time), you can file an extension (Form 4868), which will delay your individual tax return filing date until October 16, 2017.
All tax extensions are automatically accepted by the IRS. Unfortunately, however, that doesn’t mean that you can delay your payment, which is still due on or before April 18. Additionally, if you are unable to resolve your tax liabilities on time, interest and penalties will still accrue on payments made after the initial deadline.
The Benefits of Filing a Tax Extension
The main benefit of filing a tax extension is that you will avoid failure-to-file penalties, which can be as much as 25% of the total amount owed if you miss the tax deadline without filing an extension beforehand. These fees can add up rather quickly, and they may even result in you being unable to resolve your tax issues before the next tax year.
Since it’s theorized that IRS auditors are required to meet audit quotas early in the year, most tax experts agree that your chances of being audited likely decrease if you file an extension on time. It is sometimes unclear exactly how or why the IRS chooses certain returns for audit, but it makes sense that the less time a return is in their possession, the less likely it is to be audited.
Prepare Your Return Even If You’re Filing an Extension
If you’re filing an extension, you should still prepare your tax returns in April so that you can get a baseline understanding of what you might owe. Then, when you file your extension, you can also send a payment to the IRS based on your estimate.
Mail Form 4868 to the IRS by certified mail with return receipt requested. This will give you proof that you mailed the form before April 18 and will also verify the date that the IRS received your form. IRS Direct Pay allows users to make their payments and mark them as extension payments, eliminated the need to submit a Form 4868. Individual tax preparers can also file their extension online for free by clicking here.
If you overestimated your payment, the IRS will issue a refund automatically. Conversely, even if you can’t pay the amount in full, your payment will still decrease the amount of penalties and interest that will be enforced on the remaining amount you owe. Once you’ve narrowed your tax liability to a more manageable figure, you might be able to set up an extended payment agreement with the IRS.
Also, if you file an extension with the State of Maryland and owe additional state taxes, you’ll have to file a Form 502E on or prior to April 18, along with a check for the amount you expect to owe. You can also pay by credit or debit card if you file electronically.
Remember: Filing an Extension Does Not Give You Extra Time to Pay
If there’s one thing you should take away from this blog, it’s this: Filing an extension helps limit penalties and interests, but it does not provide you extra time to pay or eliminate the failure to pay penalties. If you owe the IRS, your tax payment is due April 18 ― there’s no getting around that.
However, if you’re unable to pay your taxes on time, you can request a short extension of time to pay, during which you’ll pay lower interest and penalties. Alternately, you can establish an installment agreement with the IRS that might help you resolve your tax liabilities in a timely fashion.
Contact S.H. Block Tax Services If You Owe More than $10,000
It can be difficult for individuals who owe money year after year to get back on track with the IRS. Often, it seems like as soon as they have a good plan in place, tax season rolls back around, and they suddenly owe even more. If this sounds familiar, S.H. Block Tax Services may be able to help.
With more than 100 years of tax representation at our disposal, S.H. Block Tax Services is uniquely positioned to help individuals with severe tax liabilities. If you owe more than $10,000 in taxes or have failed to file for several years, we would love to talk to you and find out how we can help you resolve your tax issues in a timely and professional manner. Please call (410) 872-8376 today to learn more about our firm and schedule an appointment or a free consultation.
Penalties and interest will continue to accumulate until your tax issues are resolved, so please contact us today to start getting back on track with the State of Maryland and/or the IRS.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.