Can’t Meet the IRS Filing Deadline?
Taxpayers who cannot meet the IRS filing deadline for their federal tax return can file for an extension that will push the date to October 15, 2020. This does not mean that the time to pay taxes is extended, too. When it is expected that taxes will be owed, the taxpayer must pay the estimated amount due and file Form 4868. If both these things are done, the IRS will grant an automatic extension.
Why Taxpayers Should File for an Extension
The benefit of filing for an extension is that the due date will be extended, and the filer is protected from possible penalties for not filing. For example, when a filer does bit file by the due date, and has bit filed for an extension, he or she may be subject to late-filing penalties. These penalties can add up to five percent of taxes due for each month that the filer is late. When an extension has been filed, that penalty is wiped out.
What Happens When an Extension Isn’t Asked For?
There can be consequences for not filing an extension. How severe these consequences will depend on whether the taxpayer is getting a refund or has a balance due according to their tax filing.
There is no penalty for taxpayers who fail to file their tax return by the deadline or fail to get an extension if they are entitled to a refund. However, the downside to filing late is that the taxpayer will not get his or her refund as soon as possible. Because the IRS’s statute of limitations for having a tax audit starts once a return is filed, the sooner taxes are filed, the better.
For taxpayers that owe taxes, they will owe a late payment penalty of 0.5 percent per month until their taxes are paid. The maximum late payment penalty is 25 percent of the amount of taxes due. The taxpayer may also own interest on the amount of taxes not paid by April 15. Additionally, if an extension has not been filed, the delinquent taxpayer will be subject to the late filing penalty of five percent of the unpaid tax per month and interest. The maximum penalty for a late filing is 25 percent of what is owed.
When Taxpayers Cannot Pay Their Taxes
Sometimes a taxpayer simply cannot pay their taxes. In that situation, there are a few options available. He or she could pay their taxes with their credit card. It is also possible to enter into an installment agreement with the IRS or make an offer in compromise.