As part of the extension process, you are supposed to estimate your tax liability. If you estimate that your return, when you ultimately file it, will have an overpayment, there is nothing else you need to do. When you file your return, you will receive your refund. There is no cost, interest or penalties associated with the extension as long as you file by the extended due date.
What if you estimate that you will have a balance due on the return? The extension is an extension of time to file, not an extension of time to pay. Also, the extension is automatic whether you pay or not so not paying will not jeopardize your extension to file. However, if you don’t pay, the balance due will be subject to interest accruing from April 15th until it is paid, and depending on the amount due, you could also be subject to penalties on the unpaid balance. As I said before, if you pay your full tax liability by April 15th, there will be no additional interest or penalties. Also, if you pay by April 15th, but you underestimate your liability, the only interest (and potential penalties if applicable) will be on the unpaid balance. So, paying now will limit your additional cost when you do ultimately file and pay.
Filing an extension yourself is really easy. You can get all the information you need right on the IRS.gov website. Many taxpayers can file the extension request electronically. You can file a free extension by linking from the IRS.gov website to one of many websites that the IRS recommends for free filing. Anyone, no matter your income, can file an extension for free using one of these sites.
If you want to make a payment with your extension request, you can also do that by going to IRS.gov. From there you’ll select “Pay” and go to Direct Pay. Direct Pay is a free service that will allow you to have the amount you want to pay with your extension request drafted from your checking or savings account. This service is safe, secure and free.
Most state websites will have similar services where you can extend your return and pay an extension payment at no additional cost.
I can’t emphasize enough that you need to file an extension whether you can pay or not. Penalties for not filing or filing late are much more severe than penalties for paying late.
If you have questions about filing an extension, paying your taxes, or any other tax or financial planning topic, please call or email.
We are accepting new clients please contact us for an appointment.At Faw & Associates, we are always available to answer any of your tax or financial planning questions. We are accepting new clients please contact us for an appointment.