I am behind on taxes. Should I request an extension?

At this point, there’s still plenty of time left to file your taxes before the April 15 deadline this year. But what happens if you’re really behind, haven’t received your tax assistance yet, and have no way to complete your return by mid-April?

One thing to know is that if you don’t owe the IRS and are due a refund, you won’t be penalized for filing your tax return late. A late return in these circumstances will delay your refund being deposited into your bank account. Since this doesn’t harm the IRS (if it benefits you anyway), there are no additional penalties.

However, if you’ll have to pay taxes to the IRS starting in 2023 and file your return late, you could face significant penalties for filing your taxes late. The non-filing penalty is 5% of your unpaid tax bill for each month or part of a month in which your return is late, up to a maximum of 25%. That can be a lot of money.

That’s why it’s important to request a tax extension if you’re behind on your taxes and don’t expect them to be completed by April 15. But it’s also important to understand how tax extensions work.

You have more time to submit. There is no more time to pay.

If you request a tax extension by April 15, the IRS will extend the time you have to file your return by six more months. And don’t worry. You don’t have to make the excuse, “My dog ​​ate my tax return.”

When you request an extension, you do not need to disclose why you need more time. you just ask For more time.

In other words, a tax extension does not give you additional time to pay your tax bill. Failure to file penalties are waived, but late payment penalties assessed by the IRS for tax bills filed after April 15 are not waived.

The late payment penalty is equal to 0.5% of the unpaid tax for each month or partial month in which payment is late. Obviously, this is significantly less than the failure-to-file penalty, but the late payment penalty is also up to 25% of the amount you owe. In other words, letting IRS tax debt continue to be a bad thing is not a good thing.

Either way, pay on time

If you want to request a tax extension, it’s a good idea to estimate how much you owe the IRS and pay by April 15th. Tax software can help. Let’s say you estimate your tax debt to be $2,000 and pay that amount. In reality, after completing my tax return, I discovered that I owed $2,500. In this case, you will only be assessed a late penalty for the $500 you did not submit, which will minimize the damage.

Ultimately, you may need more time to complete your taxes this year, but that doesn’t necessarily mean you have to panic. But make sure you understand how tax extensions work. And request additional time on or before April 15th. Any more than that may result in you being reported and penalized for tardiness.

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