Yes, the tax filing extension is automatic, but only if you take action by the last tax filing date, 18th April 2023, for the tax year 2022. Time is running out for taxpayers who need to file for an extension for the tax year 2022. With only a week or so (April 18) left, it’s essential to understand the process, the consequences of late payments, and how to avoid any penalties and interest. This article will guide you through filing an extension and discuss the potential consequences and solutions for late payments.
How file extension taxes?
There are various ways to filing extension for taxes. But the common thing is a prescribed form 4868. So, if for any reason, you cannot file your tax return by the April deadline, the IRS allows you to request a six-month tax filing extension by submitting Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return,”. This extension request form must be filed by the original due date of your tax return. So, for the tax year 2022, the due date is April 18 2023, and you must file Form 4868 by that date. The extension grants you additional time to file your return but not to pay your taxes.
For Quick Result, File for Extension Online
Step 1: Complete Form 4868, which requires your basic information, such as your name, address, Social Security number, and an estimate of your tax liability. You can find Form 4868 on the IRS website.
Step 2: Filing extension form online using IRS Free File, commercial tax software, or mail a paper form to the appropriate IRS address. Submitting Form 4868 electronically results in the approval of an extension quickly. If you choose to mail your form, be sure to send it with a postmark on or before the original due date of your tax return.
Step 3: It is advisable that you must pay at least 90% before you file an extension, even though this is not a pre-condition for a grant of a six-month extension. This should be done because the automatic extension is only for filing the return and not the extension for payment of tax outstanding as on the original due date of filing the tax return. If you do so, you will incur late payment penalties.
Extension Filing for Expat Americans
U.S. citizens and resident aliens living abroad are subject to special tax-filing rules. If you are an expatriate, you are granted an automatic two-month extension to file your tax return without requesting an extension. Your tax return is due on June 15 instead of April 15. However, you must still pay any taxes owed by the original April 15 deadline to avoid interest charges.
If you need additional time to file beyond the automatic two-month extension, you can request a further extension by filing Form 4868 before the June 15 deadline. This will grant you an additional four months to file, extending your deadline to October 15. Remember that any taxes owed must still be paid by April 15 to avoid interest.
Special Rules for Taxpayers Serving in Combat Zones
Taxpayers serving in a combat zone or a qualified hazardous duty area have additional time to file and pay their taxes. According to the IRS, these individuals have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. In addition, the deadline is extended by the number of days left for the individual to take action with the IRS when they enter the combat zone.
For example, if taxpayers entered a combat zone on March 31, they had 15 days to file taxes (April 15 deadline minus March 31). Therefore, they would have 195 days (180 days plus 15 days) to file and pay their taxes after leaving the combat zone.
To notify the IRS of your combat zone service, you or an authorized representative can send an email to [email protected] with the following information:
- Your name, address, and Social Security number (or Individual Taxpayer Identification Number).
- The date you entered the combat zone and, if applicable, the date you left the combat zone.
- A statement indicates that you currently serve in a combat zone or a qualified hazardous duty area.
If you prefer to send a written notice, you can mail it to the following:
Internal Revenue Service Attn: Combat Zone P.O. Box 105292 Atlanta, GA 30348-5292
Understanding Late Payment Penalties and Interest
If you fail to pay your taxes on time, the IRS may impose penalties and interest. The late payment penalty is typically 0.5% of your unpaid taxes for each month or part of a month that your taxes remain unpaid, up to 25%. According to IRC § 6651(a)(2), the penalty begins to accrue the day your taxes are due.
Additionally, interest will accrue on your unpaid taxes and any penalties. The interest rate is determined quarterly and is equal to the federal short-term rate plus 3%. You can find the current interest rate on the IRS website.
How to Deal with Late Payments of Tax
To minimize penalties and interest, pay your outstanding tax liability immediately. The sooner you pay, the lower the penalties and interest you will owe. Following, options are available to deal with tax debts
- You can apply for an IRS payment plan if you cannot fully pay your taxes. This will allow you to pay your taxes in smaller, more manageable monthly instalments. Remember that penalties and interest will still accrue on unpaid taxes during the payment plan.
- You may be eligible for penalty abatement if you have a reasonable cause for your late payment. To request penalty abatement, you can call the IRS, submit Form 843, “Claim for Refund and Request for Abatement,” or write a letter to the IRS explaining your situation. Some common reasons for penalty abatement include serious illness, natural disasters, or other unforeseen circumstances that prevent you from paying your taxes on time.
- If you can’t pay your full tax liability or doing so would create a financial hardship, you may be eligible for an Offer in Compromise. An OIC lets you settle your tax debt for less than the full amount owed. However, before accepting an OIC, the IRS considers several factors, such as income, expenses, and asset equity.
- If you’re experiencing significant financial hardship and cannot pay your taxes, you can request the IRS temporarily delay the collection process. This will give you some time to improve your financial situation, but penalties and interest will continue to accrue on your unpaid taxes.
More Resources on Tax Filing Extensions?
For more information on the penalties and interest associated with late payments, refer to the Internal Revenue Code (IRC) § 6651, which covers the failure to file a tax return, failure to pay tax, and fraudulent returns.
In addition, the Revenue Ruling 2005-59 provides further guidance on the reasonable cause for abatement of penalties imposed under IRC § 6651. This Revenue Ruling offers examples of situations where reasonable cause may be found and can help determine if your circumstances qualify for penalty abatement.
If you’re unable to pay your taxes in full, consider requesting a payment plan, penalty abatement, an Offer in Compromise, or a temporary delay in collection. By understanding your options and acting promptly, you can minimize the financial impact of late payments and ensure you stay in compliance with the IRS.
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