So you got your W-2 and a few other statements in February and thought, Meh, I’ll do my taxes later. Or maybe you put off doing your taxes because you were missing an important document. March flew by, and before you knew it, Tax Day was looming.
If that’s you, you might need to file a tax extension. Not sure what that even means or how it works? Don’t worry. We’ve got the full scoop on everything you need to know about tax extensions.
What Is a Tax Extension?
Simply put, a tax extension gives you six extra months to file your taxes. So instead of your tax return being due on Tax Day (usually April 15), it’ll be due October 15. Just in time for a pumpkin spice latte (if that’s your jam).
Due to weekends and holidays though, tax deadlines are a little different for 2023. Tax Day is April 18, and the extension due date is October 16.
But fair warning: An extension doesn’t buy you more time to pay your taxes. If you owe taxes, they’re due on Tax Day, and if you don’t pay by Tax Day, you’ll rack up late-payment penalties (0.5% of your tax bill a month up to a max of 25%) and interest.1 However, filing an extension can help you avoid big failure-to-file penalties, which are 5% a month up to a max of 25%.2
Is It Easy to Apply for a Tax Extension?
The IRS has a well-earned reputation for making things overly complicated. Ever try to navigate the IRS website? It’s a maze of schedules and publications. But filing a tax extension is pretty doggone easy, and most are automatically approved.
How Do I File an IRS Tax Extension?
So, all you have to do to file an extension is fill out Form 4868. And seriously, the form just asks for basic information like your name, address and Social Security number. You’ll also need to estimate your tax liability, and look up how much in federal taxes you paid (you can find that on your W-2). You need to report this info so you can make a tax payment to the IRS when you file your extension. If you don’t owe taxes, you don’t have to file an extension. But you’ll be missing out on a refund.
But look—if you’re going through the hassle of trying to figure out your tax liability, you might as well just file your tax return. By the way, if you own a business, you’ll need to fill out Form 7004 (it’s a little more complicated).
The IRS allows you to e-file an extension through the IRS website. Or you can file an extension with your tax software. If you want easy-to-use tax software with no hidden fees, check out Ramsey SmartTax.
If you owe taxes and make a full or partial payment online, you’ll get an automatic extension without having to fill out Form 4868. But you still have to file your tax return eventually.
Request by Mail
Like the taste of licking stamps and envelopes? You can download Form 4868 from the IRS website, fill it out, and snail mail it to the IRS along with a check or money order for your tax bill. But snail is the key word to remember. Due to the COVID-19 pandemic, the IRS is way behind on its paper correspondence. We’re talking millions of unprocessed tax returns!3 So if you want a response from the IRS, you should really try to file electronically.
How Long Is a Tax Extension?
A tax extension lasts for six months. But you don’t want to push the deadline because the IRS only gives one extension. Miss the second deadline, and you’ll be hit with failure-to-file penalties.
How Do I Know My Tax Extension Request Has Been Approved?
Extensions are pretty much automatically approved. It’s rare for the IRS to reject a tax extension. Form 4868 doesn’t even ask for a reason for your extension. So, my dog ate my W-2 or I was too busy binge-watching Netflix are all okay excuses as far as the IRS is concerned.
Don’t settle for tax software with hidden fees or agendas. Use one that’s on your side—Ramsey SmartTax.
When you file your extension electronically, you’ll receive an electronic confirmation. Hang on to that! If you filed by mail, you probably won’t receive a confirmation from the IRS. You can just assume your request was accepted. Or, if you don’t mind waiting on hold for hours, you could try calling the IRS to see if they received your form.
Why Might a Tax Extension Request Be Rejected?
If your tax extension is denied, don’t freak out. You probably just fat-fingered the form. Rejections are almost always due to a mistake on your personal information. Simply resubmit your request and make sure to enter your Social Security number (and your spouse’s number) correctly.
How Much Does a Tax Extension Cost?
This one is rare for the IRS. A tax extension is free! It just takes a little bit of time to fill out the form to request an extension.
What Does a Tax Extension Not Do?
We said it earlier, but it’s worth repeating: A tax extension doesn’t give you more time to pay your taxes. If you owe taxes, you must pay them by Tax Day. Otherwise, you’ll have to pay interest and late penalties.
Figuring out how much you owe without actually filling out your tax return can be tricky. The IRS offers online tools to figure out your tax bill so you can send in a payment with your extension form.
If you owe on taxes, should you even file an extension?
Even if you can’t pay a dime of your taxes by Tax Day, you should still file an extension. The penalty for not filing your taxes is 10 times more severe than filing and paying late. Pay as much of your bill as you can, and if you still can’t afford to pay your tax bill after six months, look into setting up a payment plan with the IRS.
What’s the IRS Penalty for Not Filing Your Taxes on Time?
When it comes to late penalties for not filing your taxes, you could be in one of two scenarios:
Are you expecting a refund?
If you’re expecting a refund, you won’t get a penalty for filing late. You just won’t get your tax refund until you file. The IRS will hold onto your money for up to three years.4 What happens after three years? The IRS pockets the cash.
Do you owe taxes?
Failing to file an extension could cost you a pretty penny if you owe taxes. For every month (or partial month) you don’t file your return, you’ll pay an additional 5% of what you owe up to 25%.5
For example, let’s say you owe $1,000 and miss the April deadline and don’t file an extension. You finally get around to filing your taxes on May 25. Your failure-to-file penalty would be $100 ($1,000 x 10%). You’ll also owe interest (currently 4% per year) on your bill.6
What’s the IRS Penalty for Not Paying Your Taxes on Time?
Let’s say you file an extension, but you can’t pay all your tax bill. The late payment penalty is much less severe than the failure-to-file penalty. Instead of paying 5% every month, you’ll pay 0.5% per month up to a maximum of 25%.7 You’ll also pay 4% interest.
Let’s go back to our example above. Say you owe $1,000, but this time you file an extension. By May 25, your penalty would be $10 ($1,000 x 1%), plus interest.
What Is the Deadline for Filing a Tax Extension?
The tax extension deadline is always the same as Tax Day. This year it’s April 18.
Can I File an Extension After Tax Day?
Nope. You can’t file an extension after Tax Day! You’re out of luck (and time) if you don’t ask for an extension by Tax Day. That means you’ll start racking up failure-to-file penalties until you submit your tax return.
When Should You File a Tax Extension?
Now, let’s be clear. If your tax situation is pretty simple and you’re just feeling lazy, get your butt off the couch and do your taxes! Better yet—grab a laptop and do your taxes from your favorite spot on your couch.
Otherwise, here are some situations where it’s okay to file an extension:
1. You don’t have the documents you need.
Are you missing your W-2, 1099 or other important documents? In that case, file for an extension, gather those documents, and do your taxes.
2. You go through an unexpected life event.
Life doesn’t stop for taxes. If you experience a traumatic life event like a death or illness, don’t push yourself to finish your taxes. File for an extension, focus on your life, and do your taxes later. Just don’t forget about them!
3. Your tax situation is really complicated, and you just need more time.
Itemizing tax deductions or owning a small business can make your tax filing really difficult. In that case, pushing the deadline to October can prevent you from rushing through your taxes and making dumb mistakes.
But listen: If your tax situation is that complicated, you should work with a pro. What may take you days or weeks to do can take a pro far less time.
What if You’re Out of the Country for the Tax Deadline?
If you’re on a trip for work or on vacation and you miss Tax Day, the IRS doesn’t want to hear your excuses. You’re still expected to file your taxes (or an extension) before the April deadline. The IRS does offer a little bit of grace if you’re living outside the country on Tax Day.
Out of Country
U.S. citizens who are living outside the States for work or military service receive an automatic two-month extension to file their taxes.8 That means you’ll have until June to file your return without penalties. However, interest will be added to your bill starting on Tax Day.
Combat Zone Extension
Service members who are deployed overseas in a combat zone or as part of an operation protecting national interests don’t have to file a tax return or pay their tax bill until 180 days after the deployment has ended.9 This also applies if you were injured and hospitalized while serving.
Extended 2023 Federal Return Deadlines for California, Alabama and Georgia
Unfortunately, many people in California, Alabama and Georgia were affected by storms and other natural disasters in 2022. To help provide some relief, Uncle Sam has extended the federal tax deadline for people living in storm-affected areas in those states until October 16. This extension applies to both personal and business returns.
If you qualify for this extension, it means you’ll have more time to gather all your tax forms and paperwork for when you’re ready to file online or reach out to a tax professional. You can also make contributions to your IRA or HSA (Health Savings Account) for the 2022 tax year up until the extended deadline of October 16.10
State Tax Extensions
States that collect income tax typically have the same Tax Day as the IRS. (There are nine states with no income tax.) All of these states offer some type of extension. Several states—Alabama, California, Colorado, Maine, Minnesota, Montana and Virginia—offer an automatic six-month extension. You don’t even have to fill out a form!
Quite a few states allow you to have an extension if you filed a federal extension. This means you won’t need to fill out any additional forms. Some states require you to pay a portion of your tax liability to qualify for an automatic extension. Occasionally, states might offer a state-wide extension due to a natural disaster. Here again, an extension only gives you more time to file, not more time to pay your bill.
Are You Having Trouble Doing Your Taxes?
Here’s the thing: Getting a tax extension doesn’t solve your initial problem—getting your taxes filed.
If you don’t think you’ll be able to get your taxes together in time, talk with a RamseyTrusted tax pro. These tax experts have years of experience and, believe it or not, they love this stuff. They can help you get your taxes together after you file an extension. Find a tax pro near you!
If your taxes are pretty straightforward and you want an easy-to-use tax software that can give you some peace of mind, check out Ramsey SmartTax! No hidden fees, no advertisements, no games. That’s how it should be!