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Feeling squeezed by time? Maybe you should file a tax extension.

Feeling squeezed by time? Maybe you should file a tax extension.

April 04, 2024

If you’re one of the 10% to 15% of people who could use more time to prepare your federal tax return, read on! Monday, April 15th, 2024 is the deadline to file your 2023 tax return and any taxes due for the year. It’s also the last day to request a 6-month extension to file your return. Some things to consider:

  • What is a Tax Extension?

A tax extension extends the deadline to file your completed 1040 personal tax return to October 15th, 2024, and helps you avoid a late filing penalty. It is requested using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The form only takes a few moments to complete, but you will need to include an accurate estimate of your tax liability for 2023.

  • What Does a Tax Extension Extend?

A tax extension only extends the deadline for filing your tax return. It does not give you more time to pay your taxes. Taxes must be paid by the regular April 15th, 2024 tax filing deadline to avoid penalties and interest.

  • How to Estimate Taxes for an Extension:

Taxpayers must estimate their tax liability accurately (within 90%) when requesting an extension. This can be done using online tax software or with the help of a tax professional.

  • Consequences of Not Paying Estimated Taxes by April 15th, 2024:

Filing a tax extension helps avoid a failure-to-file penalty. However, you may be assessed a failure-to-pay penalty if you don’t pay at least 90% of the taxes owed by April 15th, 2024. The IRS will hit you with a double penalty if you fail to file your return, do not request an extension, and don’t pay at least 90% of what you owe by April 15th, 2024. (The penalty structure is beyond the scope of this article, but they can become steep—therefore, you want to avoid paying them wherever possible!) 

  • Who Needs to File a Tax Extension?

Most Americans who could use additional time to file their taxes should consider filing an extension. However, some individuals may qualify for automatic extension based on specific provisions in the tax code (for example, those impacted by a qualified natural disaster, or military personnel living or working outside of the U.S. on tax filing day.)

  • How to File a Tax Extension:

Taxpayers can file a tax extension online, by mail, or with a tax professional. You can file your tax extension for free using the IRS’s Free File website, or with one of the many popular online tax software providers such as TurboTax, e-File and H&R Block. A benefit to filing your extension online via the IRS or other providers is digital tracking. You can also do it the old-fashioned way, by printing off Form 4868 and mailing it to the address specified in the instructions. However, no matter which option you choose, it must be requested (postmarked, in the case of mail) by April 15th, 2024.

  • Possibility of Extension Rejection:

While tax extensions are typically approved immediately, rejections can occur due to typos or address discrepancies. Taxpayers can correct and resubmit their extension—up to the tax extension filing deadline—if it is rejected (the IRS will typically grant a 5-day grace period to refile a corrected extension after the filing deadline). Another benefit to requesting an extension online is that you will learn of a rejection more quickly.

  • What if I expect a refund?

The IRS is a bit more forgiving if you don’t request an extension when you’re getting a refund. However, you may forfeit your entire refund if you don’t file a completed tax return within three years of that year’s tax filing deadline. (Fun fact: The IRS estimates that over $1 billion worth of funds are due back to nonfilers from 2020. They have until May 17, 2024, to file a tax return for that year and claim their refund.)