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Persuading the IRS to give you more time after the tax-filing deadline to file your tax return is fairly easy. But there are several steps you'll need to take if you're filing taxes late.
Step 1: File a tax extension
Filing a tax extension with the IRS gives the agency a heads-up that your return will be late. It can also protect you from incurring a late-filing fee of 5% of your unpaid taxes for each month (or portion of the month) that your tax return is late.
To get an automatic six-month tax extension, you'll have to submit Form 4868 to the agency by tax day. But the work doesn’t end there, because a tax extension extends your time to file, not to pay.
Note that the IRS generally doesn't assess a late-filing fee on late returns that result in a refund, but it may be a good idea to file a tax extension anyway. If you end up miscalculating and owe taxes, an extension can save you from the late-filing fee discussed above.
Step 2: Estimate your bill, and set aside cash for interest
When you file for an extension, make a good estimate of what you owe the IRS and send some or all of that amount along with your extension request. If the estimated payment you send ends up being less than what you actually owe, you’ll need to pay interest on the difference. “The interest runs until you pay the tax. Even if you had a good reason for not paying on time, you will still owe interest,” the IRS says on its extension form.
Step 3: Prepare to pay a tax penalty, too
The IRS’s late-payment penalty normally is 0.5% per month of the outstanding tax not paid by the tax filing deadline. The maximum penalty is 25%.
You might catch a break on the penalty if you’ve paid at least 90% of your actual tax liability by the tax-filing deadline and you pay the rest with your return.
Step 4: Circle Oct. 16 on your calendar
If you get an extension, Oct. 16, 2023, is the last day you can file your return and pay your outstanding balance. If you miss this deadline, the IRS can assess a late-filing penalty of 5% of the amount due for every month or partial month your return is late. That means if you owed an extra $1,000, you could rack up $50 in penalties for every month after October that it’s outstanding. The maximum penalty is 25% of the amount due. In our example, that can mean shelling out an extra $250.
If you file your taxes more than 60 days late, you’ll pay either $450, or what you still owe, whichever figure is smaller. And remember, that’s on top of what you still owe in taxes.
The good news is that the IRS may throw you a lifeline: You may be able to apply for penalty relief if you have “a reasonable explanation” for filing late, or if you have a clean record with the IRS and this was your first hiccup.
Also, you don't need to wait until October to file the return. Organize your tax life, and file and pay as soon as you can, and you'll pay less in interest.
» MORE: Find the best tax-prep software
Step 5: Relax if you’re abroad or in the military
For virtually anyone who files late taxes, forgetting to request an extension is a huge no-no. But if you’re a U.S. citizen or resident who lived and worked outside of the country on the tax-filing deadline, you automatically get two extra months to file your return and pay any amount due without having to request an extension. People affected by certain natural disasters may automatically get more time as well. Some members of the military also get more time, depending on where they are, and what they’re doing.
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Step 6: Lift your chin up
Procrastination isn’t the only reason people get extensions. For example, many investors don’t receive their K-1s, which are statements of income from partnerships, until mid-March or later. Assuming you remembered to request an extension by the deadline, filing your taxes later doesn't put some sort flag on your record.
And finally, remember that a tax extension doesn't give you more time to settle your tax bill. The IRS expects that you pay your estimated liability along with your tax extension request. If you think you'll need some extra time to pay down your tax debt, the agency offers a number of tax relief options, including IRS payment plans that can help you to pay off your bill in smaller chunks over time.
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