The April 18 tax deadline has passed but those who filed for an extension still have six months to file. Optima Tax Relief reminds taxpayers of important details regarding tax extensions.
One of the most important items to note when filing for an extension is that doing so does not give the taxpayer more time to pay their taxes. Not paying taxes by the deadline can result in additional penalties and fees. The late-filing fee can cost 10 times as much as the fee for failing to pay, so it is important to at least file or request an extension by the deadline each year.
Another thing to note is that an extension is not granted automatically, and it instead must be requested by the tax deadline via Form 4868: Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. An exception to this rule is when a taxpayer makes an electronic tax payment and indicates it is for an extension.
Taxpayers should pay as much as they are financially able to by the due date to avoid additional penalties and interest, including:
- Interest: 4% per year, compounded daily
- Late-filing penalty: 5% charge per month
- Late-payment penalty: 0.5% fee per month
There are some taxpayers who qualify for automatic extensions without having to officially request them. These include:
- S. citizens and residents who live and work outside the U.S. and Puerto Rico: This group has until June 15 to file each year but must pay taxes by the April deadline to avoid interest payments.
- On duty military members outside the U.S. and Puerto Rico: These individuals have until June 15 to file each year but must also pay taxes by the April deadline to avoid interest payments. Those serving in combat zones have up to 180 days after leaving the combat zone to file and pay taxes.
- Taxpayers who reside in a declared disaster area: The area must be declared an affected area by the President.