If you are behind on filing your taxes, apply for an extension today – before the 2020 tax deadline at midnight – as you will avoid costly IRS penalties if you fail to file your tax return on time. Here’s what you need to know.
Why you might be applying for a tax extension
Whether you’re missing tax documents (like a stray Form 1099), dealing with an emergency, or simply forgetting the deadline, you can gain extra time filing your taxes by requesting an extension until October 15, 2021. Taxpayers living abroad are eligible for an automatic renewal until June 15 – details can be found here Here )
However, that doesn’t mean your taxes aren’t due today. If you think you owe the 2020 IRS money, you still have to pay at least as a minimum 80% of your estimated tax bill before the end of today. This payment can be made as part of your tax extension claim, even if it is a rough estimate (if you overpay, the IRS will reimburse you for the difference later). Otherwise, starting tomorrow, you will be charged a non-payment penalty equal to 0.5% of your unpaid taxes for each month or part of the month that you are overdue, up to a total of 25%.
Why should you apply for an extension if you are still being charged interest? Well, An extension avoids an additional penaltyThis is ten times greater than a late payment penalty. This equates to 5% of your unpaid tax bill for each month or part of the month that your return is delayed, up to 25%. (And just because the IRS likes to be confusing: If the non-filing and non-payment penalties are executed at the same time, you are actually only paying 4.5% for the non-filing penalty, which is a maximum of 22.5% as the IRS limits the combined penalties to a total of 5%.
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How to apply for an extension of the tax deadline
To file an extension, you need to file an IRS Form 4868 electronically to the IRS before midnight using tax preparation software (free versions are available Hereif you make $ 72,000 or less). You can use these software programs to make a rough estimate of the potential taxes you may owe that can then be repaid as part of the Form 4868 filing process. That way, you’ll have more time to deal with paperwork and avoid late penalties. (You can also mail the form, but make sure it’s postmarked May 17th.)
Kiplinger says you can also get an automatic renewal by making an electronic tax payment of your estimated taxes directly to the IRS before midnight. Choose “Pay your taxes now ”On the IRS website to make a federal electronic tax payment using either your bank account or a credit or debit card (processing fees apply). When paying, select the “Renewal” option and make sure you save the confirmation number even after you have processed your payment.
Also important: The rules for tax extensions vary from state to state State Tax Agency website before you submit.
