Tax Extension Delays Payment Requirement—False!
A tax filing extension will provide taxpayers extra time to file the return but not to pay. Taxpayers often confuse an extension of time to file with a delay in the requirement to timely pay taxes. Getting an extension approved does not mean you have more time to pay due taxes. The tax extension will help reduce the failure to file penalty but not the failure to pay. It simply helps reduce penalties by voiding the failure to file a penalty. The failure to pay penalty is 5% on any due tax for each month that you’re late.
By filing and getting an extension approved, you are delaying your filing due date to October 15th. After the extension deadline has passed, you will once again become you will again be subject to late filing penalties.
So, what are the benefits of applying for a tax-filing extension?
So now you know that you have to pay your taxes by the national Tax Day (usually April 15th). The advantages of applying for a tax extension are listed below.
Reducing Late Penalties
Unpaid back taxes can lead to aggressive IRS collection actions such as liens and wage garnishments. Late filing penalties can rack up quickly. The penalty for failure to file accrues at 5% per month, up to a maximum of 25%. This is on top of what you already owe. If you already have a large tax liability, this extra debt could contribute to any existing financial hardship.
If you are concerned that you will not meet the deadline, it’s better to apply for an extension just in case.
Audit Risk Reduction
It is beneficial to take the extra time to make sure you have every document and receipt needed that will properly support your deductions. The more accurate the numbers for your deductible expenses, the less likely you will be audited. Taking your time to file also decreases the likelihood of being audited since the IRS is less inclined to audit taxpayers who file later in the year. This is because they have many required audits that they must conduct a year. It is more likely they have already identified the taxpayer they plan to audit by October.
Up-to-Date Info About Filing a Tax Extension
The 2020 pandemic has caused confusion regarding the deadline for the extension. The extension to file still ends on October 15th.
You cannot file for an extension after the Tax deadline has passed. You must apply for an extension before the tax deadline (usually April 15th) to be approved.
If you have outstanding tax return(s), past balances due, or missed the chance to apply for an extension and now owe back taxes, we can help. Follow the following steps to find tax relief;
- Click here to take our brief survey to determine if you qualify for a FREE initial consultation.
- Please speak with one of our expert Resolution Officers.
- Start your resolution process!