The tax season is around the corner and IRS anticipates that every taxpayer will file their annual income tax return before the deadline. The world pandemic made everything difficult and tax deadlines are coming in fast. However, if for some reason you can't file the tax return on time, you can appeal for an automatic extension by submitting Form 4868 to the IRS.
The penalty can be avoided by requesting an extension, but the form must be submitted before or on the regular tax filing deadline. Nonetheless, the extension only delays the filing date, not the deadline for paying the taxes you owe. Everything you need to know about filing a tax extension for the 2022 tax year is right here.
What Is a Tax Extension?
A tax extension is a request that offers taxpayers more time to file their returns. It permits you to extend the date for filing your IRS tax return by up to 6 months without risking a penalty. If you're going to owe money, the IRS expects you to calculate how much you'll owe and pay it all in total by the actual tax deadline.
You'll be charged a penalty as well as interest on any money overdue if you don't pay the full amount. The deadline for filing is the only thing that will be extended. It does not set off the payment of any outstanding debts.
Why Is It Important to Request an Extension?
To avoid penalties associated with late filing, it's critical to request an extension or file your tax return even if you can't afford to pay. The two separate penalties include a penalty for not filing or late filing and a penalty for not paying or late payment. You can evade being hit by both penalties via requesting a tax-filing extension.
How Do You File a Tax Extension?
Requesting a tax extension is a free and simple process. You are expected to fill and mail or electronically file the IRS Form 4868 to the IRS before or on the fixed deadline for filing the tax return. You are required to complete the 9 lines of the form where you're not asked to provide a reason for filing late.
The brief form asks for your identification data and total estimation of the income tax you're required to pay. The form can be filed electronically via IRS Free File without any charges.
What Is the Estimated Amount of Penalty Charged for Late Payment?
If you don't pay your due taxes on time, you'll be fined a penalty and interest. For each month or part of a month that taxes are not paid, a penalty of half a percent (.005) is imposed.
The interest rate charged for delayed payment differs. It is now set at the federal simple rate plus 3 percent, applied daily.
What Is the IRS Penalty for Filing Your Taxes Late?
You'll be charged a failure to file a penalty also called "late filing penalty" if you don't file your tax return on time with and with no extension request. If you don't pay your taxes for a month or part of a month, or if your return is late, the IRS will levy you a penalty of 5% of the outstanding amount. By applying for an automatic tax extension by the usual tax-due date, you can avoid the penalties.
What Can Be Done When You Can't Pay Before the Deadline?
You can settle as much as you can afford and file Form 4868 or a completed tax return if you are unable to complete your tax return by the standard tax deadline. The more you pay the less debt you'll have to pay in the future. If you can't pay what you owe, you can apply a payment plan from the IRS depending on the amount you owe, you may be able to set up a short-term or long-term repayment plan to settle your debt.
What About the Possibility of a State Income Tax Extension?
There's no need to apply for an extension if you don't owe your state any income taxes. However, you will be required to obtain an extension if you have a tax balance due for your state. You can seek more information from the nearest tax or start expert.
Bottom Line
To avoid the penalties connected with late filing, apply for an extension to pay money owed or to file a return. Before the extension expires, file the full return and confirm with your jurisdiction to see whether you have to file a state extension. You can settle what you can afford and work out a payment plan with the IRS to offset the balance.
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