For most American taxpayers, April 18 is Tax Day this year–the due date for filing your tax return. However, over 10 million taxpayers choose to file an extension. What is a tax return extension? A tax extension is a request to the IRS for extra time to file your tax return. However, it is not an extension of time to pay your tax bill. You will owe interest on any amount not paid by the April 18 deadline, plus you may owe penalties.
There are two basic penalties that the IRS typically imposes:
- a late filing penalty, and
- a late payment penalty.
If you file an extension and then file by the October 17 deadline, you’ll avoid the 5% per month late filing penalty. You still may be subject to the late payment penalty if you didn’t pay any tax due by April 18. If you choose to file an extension, include any amount that you think you might owe to the IRS.
There are multiple reasons why one would need to file a tax return extension. Some common reasons for the request include incomplete tax documentation, unanticipated life events or tax planning purposes. Once an extension to file has been accepted by the IRS, they will automatically grant you an additional six months, giving you a little more time to get your information together.
Some taxpayers worry that they are more likely to be audited by the IRS if they request an extension. This isn’t true! The IRS uses the same audit determinations on all tax returns filed.