How to file for a tax extension with the IRS
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If you’re like millions of Americans, you might need more time to file your income taxes this year past the April 18th deadline. If so, you can request an extension with the Internal Revenue Service (IRS) for six more months until Oct. 17, 2022.
Even if you’ve filed for an extension, you should pay any owed taxes to the IRS by the original April 18th deadline to avoid being penalized. It’s important to remember that an extension to file is not an extension to pay your taxes — taxes must be paid regardless.
The penalty for not filing a return by the deadline is 5 percent of the unpaid tax balance each month the tax return remains not filed. The failure to pay the penalty is much less, at 0.5 to 1 percent of the unpaid taxes, which makes filing for an extension a smart move if you need more time.
How to file for an income tax extension: Using Form 4868
You can file for an extension online for free through the IRS system called “Free File.” The IRS partners with eight different third-party companies which supply taxpayers with free online-filing services.
For those with an adjusted gross income of $73,000 or less, the filing program for both taxes and an extension are free. Those who make above that amount will have to assess what the applicable fees are of each filing program to file for an extension, if any. If you make above the adjusted gross income threshold, the IRS still offers free filing forms anyone can use.
When you file for an extension online, you are essentially filling out Form 4868 electronically. Form 4868 is the paper form for filing a tax return extension, which can be sent in via regular mail in lieu of an electronic request.
If you owe taxes, you will be able to include your payment along with the paper request for an extension. Page 4 of the form directs taxpayers where they should send their extension request depending on what state they live in and whether or not there is a payment included along with the form or not.
You can pay all or part of your (estimated) tax due by using a system called Direct Pay, the Electronic Federal Tax Payment System, or with a credit or debit card. While making this payment, you can then indicate that the payment is for an extension. The IRS says it will automatically process an extension to file when you pay all or part of your estimated income tax electronically.
Why file an extension?
If you owe taxes, the extension is particularly important. More time to file means first and foremost you won’t be hit with any penalties for filing late. Penalties can add up big time, sometimes as much as 25 percent of the tax owed if you do not file and pay on time. If you owe, it also means you will have more time to get your accounts in order and have a better idea of exactly how much money needs to be paid to the IRS.
Filing an extension also allows for taxpayers to make sure they are taking advantage of all the benefits afforded to them and not leaving money on the table.
How long does the extension last?
Six months. For 2022, an extension to file will last until Oct. 17, 2022. There is no further extension past this, although taxpayers can file amended returns after this date.
What to do if you can’t pay your taxes
The IRS advises that if you cannot pay your taxes by the deadline, you should pay any amount you can by the due date and still file your return. The IRS may allow you to pay remaining balances over time in monthly installments through an installment agreement; it’s similar to how credit card companies come to arrangements with their customers for reduced payments and/or custom payment plans. You can request this type of agreement by attaching Form 9465 to the front of your tax return.
You can also request an online payment plan, which the IRS will automatically approve or deny upon completion of the online application. You may qualify to apply for a long-term payment plan if you owe $50,000 or less in combined tax, penalties and interest and have filed all required returns. You may qualify for a short-term payment plan if you owe $100,000 or less in combined tax, penalties and interest. If you are a sole proprietor or independent contractor, you can apply for a payment plan as an individual.
If you cannot pay the amount due at all, you can request an Offer in Compromise, which would reduce the amount owed if approved.
You may find yourself needing to file an income tax extension at some point — and it’s a better choice than filing a return late. But remember: an extension for extra time to file is not an extension to pay. If you owe taxes, even paying a small amount towards the bill by April 18, 2022 will help reduce late penalties. From there, you can apply to set up an array of payment options through either the automated IRS online system or request an offer in compromise if you wish to have the amount owed on your tax bill reduced.