Understanding the scenarios where an extension is necessary and the rules for estimated payments can save you from penalties. Here’s a breakdown to help you decide.
When you don’t need to file a tax extension
- If you’ve made all required estimated tax payments for the year and have no additional filing needs, there’s no penalty for filing your tax return by the standard deadline (usually April 15).
- However, making estimated payments alone does not waive your filing requirement. You must submit your return by the original deadline or request an extension.
When you should file an extension
- If you’re not ready to file your complete tax return by the due date – for example, if you’re waiting on documents or need more time to prepare – you should file Form 4868 for an automatic 6-month extension.
- Filing the extension protects you from a late filing penalty, which is generally 5% of the unpaid taxes per month, up to a maximum of 25%.
Key considerations for tax extensions
- Payments: Remember, the extension only applies to filing your return. If you owe additional taxes and don’t pay by the original due date, you may face interest and penalties on the unpaid balance.
- Refunds: If you’ve overpaid through estimated payments, there’s no penalty for filing late. However, you must file within three years to claim your refund.
FAQs: Common questions about tax extensions
1. How do I know if my tax extension was accepted?
The IRS typically sends a confirmation. You can also check with your e-filing provider for status updates.
2. Can I file an extension after April 15?
Extensions must generally be filed by the original tax deadline. Missing this date may require additional steps or penalties.
3. How long does the IRS give you when you file an extension?
Filing Form 4868 grants an automatic 6-month extension, usually until October 15.
4. Are tax extensions automatically accepted?
Most are, provided the form is completed correctly and submitted on time.
5. How accurate does my extension need to be?
You need to estimate your tax liability as accurately as possible to avoid penalties for underpayment.
6. How do I file a tax extension?
Use IRS Form 4868, available online or through e-filing platforms.
Whether you need to file a tax extension depends on whether you’re ready to submit your full tax return by the deadline, not just whether you’ve made your estimated payments. Filing a tax extension can be useful if you need more time to prepare your return.
Always aim to pay any owed taxes by the original due date to avoid additional penalties.
We can help you calculate your estimated payments or determine whether to file an extension.
