When it comes to taxes, sometimes an extension may make the most sense for you. What is an extension exactly? Essentially, a tax extension gives you six extra months to do your taxes. In a typical tax year without IRS exceptions, this would mean pushing your filing deadline from April 15 to October 15.
If you owe income taxes, filing an extension can help you avoid the tax filing penalty, but you’ll still be liable for any amount you actually owe. We’re breaking down all the details you need to know on extensions and how to file one.
The 2021 Update
The PA Department of Revenue and the IRS announced that the income tax filing deadline for the final annual return (2020) is extended to May 17, 2021. The local earned income tax filing deadline is also being extended to match the State and Federal date of May 17, 2021.
How does this apply to you? The tax agencies will not apply late-filing penalty and interest on the tax year 2020 final returns filed between April 15, 2021, and May 17, 2021. Penalty and interest that already accrued prior to April 15, 2021, does still remains due.
This extension does not apply to any other tax payments. Employer filing deadlines for reporting payroll withholdings have not changed. Similarly, quarterly estimates for the 1st quarter of 2021 have not been extended.
How do you file a tax extension?
To file an extension, you’ll need to complete and submit an IRS Form 7004. This form allows you to request an automatic 6-month extension of time to file your income tax return.
If you know you’re ready to file an extension, you can head to IRS.gov to download the form and get more details from the IRS about making a payment.
How much does a tax extension cost?
A tax extension is free! This doesn’t mean that payments are forgotten or forgiven, but there is no fee or cost associated with it to file the extension.
If you owe taxes, should you still file for an extension?
Absolutely. Even if you’re not in a situation to pay your taxes currently, the penalty for not filing your taxes altogether is much more severe than filing an extension.
It is also important to note that a tax extension doesn’t give you more time to pay the taxes you owe. If you owe on taxes and need to file an extension, you must pay when you file your extension. Otherwise, you’ll also have to pay interest on that amount and may be subject to late penalties.
What to look for from the IRS
While you may be looking for a notice of acceptance regarding your requested extension, the IRS doesn’t send one if your extension is approved. They will, however, notify you only if your request for an extension is disallowed.
If you properly file Form 7004, the IRS will automatically give you the maximum extension allowed from your return’s due date to file the return.
What happens if you don’t pay your taxes on time?
Penalties, interest payments, and other penalties can be assessed for those who don’t pay taxes on time. While you can’t get around paying what you owe, there are ways to lessen the fees and amount outside of your actual federal tax payment that you are required to pay.
Paying your taxes on time is always the best-case scenario. And while that’s ideal, we understand that isn’t always doable. In those situations, a tax extension is the next best step. Don’t just ignore your taxes – this is where the real penalties and worst-case scenarios come into play.
Are you having trouble doing your taxes?
Simply put, filing an extension for your taxes doesn’t solve all of your problems. It’s still crucial to complete your taxes, pay in what you owe, and meet all IRS deadlines. The good news though? Our team can help! If you’re unsure of how to file an extension, don’t know if you need to, or have other tax-related questions, connect with our experts today.
