When the tax deadline arrives, if you do not file a return on time, it will result in a tax penalty. You can, however, file an IRS tax extension to avoid a late filing penalty, and it’s a whole lot easier than you probably thought, if you haven’t filed for one before.
There are a lot of reasons why you might not be ready to file your taxes by the tax deadline. For example, you’re waiting for a late form, a corrected form just arrived, your tax preparer is overwhelmed and couldn’t get to your return in time, or you do your own taxes and simply procrastinated too long. Relax, stuff happens, and this is why the IRS offers extensions.
An IRS Filing Extension is NOT a Payment Extension
There is a huge caveat to filing an IRS tax extension that you need to be aware of, however: the IRS gives you extra time to file through an extension, but not to pay. And if you owe taxes and do not pay on time, the interest charges and penalties can be significant. So, estimate your tax liability and pay at least 90% of it (or begin an IRS installment agreement plan) to avoid that mess.
In order to make this an organized read, I thought it would be best to do a Q&A format on the tax extension basics.
When is the IRS Tax Extension Application Deadline in 2023?
The IRS tax extension deadline is the same as the regular tax deadline (typically April 15, but it is pushed to the next business day if the 15th falls on a Friday through Saturday. That means the 2023 IRS tax extension application deadline is Tuesday, April 18, 2023 for 2022 tax year returns.
There are some groups of U.S. citizens that get automatic tax extensions, without needing to file for an extension:
- Members of the military and others serving in Afghanistan or other combat zone localities. Typically, military taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due.
- Taxpayers abroad: U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S. typically have until June 15 to file. Tax payments are still due on the typical deadline date.
- Those affected by certain recent natural disasters – the IRS highlights who this impacts and when their filed returns are due.
How Long is an IRS Tax Extension? When is the Tax Extension Return Filing Deadline in 2023?
6 months from the original April 15 tax deadline (or the next business day if that falls on a Friday through Saturday). The 2023 extension tax filing deadline for 2022 returns is Monday, October 16, 2023.
What is the IRS Extension Form?
The official IRS form to file for a tax extension is IRS Form 4868.
When Can I Submit a Tax Extension Form?
You can submit an application for a tax extension as early as the tax filing start date (when the IRS begins accepting and processing tax returns). This year, that date is Monday, January 23, 2023.
Where and How do you File a Tax Extension?
If you believe that you will be due a tax refund, then the best way to file a tax extension is to Free File and submit Form 4868.
If you owe money, estimate what you will owe and pay that amount with Form 4868. You can do this via efiling, mailing a paper form or by paying your taxes online. When you pay taxes online (e.g. through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or by making a credit or debit card payment), you can select that this is for Form 4868 and an extension will be automatically filed when you complete payment – no additional paperwork is necessary. There are even ways to pay your taxes with a credit card and profit.
What are the Penalties if I don’t File or Pay my Taxes on Time?
Filing an extension and paying your taxes on time is critical, because you want to avoid penalties, which can be fairly steep if you do not pay 90%+ of the taxes you will owe by the tax deadline:
- Interest Charges: you must pay interest on any tax not paid by the original tax deadline. The interest rate is determined quarterly and is the federal short-term rate plus 3%. Interest compounds daily.
- Late Payment Penalty: the late payment penalty is usually 0.5% of any tax (other than estimated tax) not paid by the tax deadline. It is charged for each month or part of a month the tax is unpaid. The max penalty is 25%.
- Late Filing Penalty: A late filing penalty is usually charged if your return is filed after the due date (including extensions). The penalty is usually 5% of the amount due for each month or part of a month your return is late. The maximum penalty is 25%. If your return is more than 60 days late, the minimum penalty is $135 (adjusted for inflation) or the balance of the tax due on your return, whichever is smaller. You might not owe the penalty if you have a reasonable explanation for filing late. The maximum total penalty for failure to file and pay is 47.5% (22.5% late filing and 25% late payment) of the tax. If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $450 (for tax returns required to be filed in 2023) or 100% of the tax required to be shown on the return.
What if I Already Filed, but my Return was Incorrect or Incomplete?
If you’ve already filed your taxes, but made a mistake and/or received new forms/documentation, you should file an amended tax return with the IRS (and appropriate states).
Can you Get an Extension on Estimated Tax Payments?
No. There is no extension on quarterly estimated tax payments.