Tax Deadline Looming? What You Need to Know About Filing Extensions

April 15 is a date that strikes fear into the hearts of many taxpayers. But what if you're not ready to file your taxes by the deadline? The good news is that you can request an extension, but there’s a catch. Here’s everything you need to know about filing for an extension and whether you still need to pay taxes by April 15.

What Is a Tax Extension?

A tax extension gives you an additional six months to file your tax return. For most taxpayers, this means the new deadline moves from April 15 to October 15. However, it’s crucial to understand that an extension to file is not an extension to pay. If you owe taxes, the IRS still expects payment by the original deadline.

Do You Have to Pay Taxes by April 15 If You File an Extension?

Yes, you do. Filing an extension only buys you more time to submit your paperwork, not to settle your tax bill. If you don’t pay by April 15, you could face penalties and interest on the unpaid amount. Here’s how it works:

• Estimate Your Tax Liability: Calculate how much you owe as accurately as possible.
• Pay by April 15: Submit your payment to the IRS by the deadline, even if you’re filing an extension.
• File by October 15: Use the extra time to ensure your return is accurate and complete.

What Happens If You Don’t Pay by April 15?

Failing to pay your taxes by the deadline can result in two types of penalties:

1. Failure-to-Pay Penalty: This is typically 0.5% of the unpaid taxes for each month or part of a month the payment is late, up to 25% of your unpaid taxes.
2. Interest Charges: The IRS also charges interest on unpaid taxes, which compounds daily.

How to Request a Tax Extension

Requesting an extension is simple. You can do it online or by mailing Form 4868 to the IRS. Here’s how:

• Online: Use IRS Free File or tax software to submit your extension request electronically.
• By Mail: Complete Form 4868 and mail it to the IRS address listed in the form instructions.

Tips to Avoid Penalties

If you’re unsure how much you owe, it’s better to make an estimated payment than to pay nothing at all. The IRS offers these tips to help you avoid penalties:

• Use last year’s tax return as a guide for estimating your liability.
• Set aside funds throughout the year to cover your tax bill.
• Consider adjusting your withholdings to avoid owing taxes in the future.

What If You Can’t Afford to Pay?

If you’re unable to pay your tax bill in full, the IRS offers payment plans and other options to help you manage your debt. Ignoring the issue will only make it worse, so it’s essential to contact the IRS and explore your options.

What Do You Think?

• Do you think the IRS should allow more time for payments when granting extensions?
• Should penalties for late payments be reduced or eliminated for low-income taxpayers?
• Is the tax system too complicated, or do extensions provide a necessary safety net?
• Would you support a flat tax system to simplify the process?
• Do you believe the IRS is fair in its enforcement of tax deadlines and penalties?