It is very important to know what tax extensions are and how to use them effectively.

Indeed you will have more time to prepare for filing your federal tax return. However, there is no extension of time guaranteed for tax payments.

People usually mistake the tax filing extension for federal tax returns as an extension for tax payments. You can read this complete article to clearly understand tax payments and how they work.

What Is Tax Extension?

A tax extension is something many taxpayers do not have a clear idea about. During most of the tax sessions, some people are looking for ways to get an extension for their taxes. A popular misunderstanding works here. They are probably thinking about the tax amount they owe, not the tax return.

There are federal tax return extensions available. People have the option to file their tax returns. But they do not get extensions for paying their taxes. So, what they need to understand is what tax extensions are and how they work.

People can file a tax extension against their tax returns which grants them more time to finish their paperwork. However, there is no time extension for the payment of their taxes.

So, according to the tax payment deadline, the date of paying tax falls on the said deadline, which is usually April 15 and the next business day if the date falls on a holiday or a weekend. Here, two things are important–

• If you know that you will get a refund, then there is no need to worry about paying during the filing of an extension for the taxes. Also, the sooner you file for a return, the earlier you will get a refund.
• But, if you know that you will owe taxes, then it is better to estimate the amount and pay the due tax when you are filing Form 4868.

How Does A Tax Extension Work?

If you are a taxpayer and need more time to file tax returns, then a six-month extension is available for you.

However, there are certain responsibilities you cannot avoid – like estimating your taxes and paying them on time. Otherwise, you must pay the penalty for late payment or not paying the taxes on the due date.

The tax extension does give you more time to file your return. But, it does not grant more time for tax payments.

Does Tax Extension Come With A Penalty? 

No, filing for a tax extension is not a bad thing or a bad practice. However, You may have to pay a certain amount in penalty if you fail to pay tax on time, or fail to pay the necessary amount or not at all. Here are a few things you need to know about tax payments and filing extensions –

• Firstly, the IRS will charge you with interest for an unpaid amount of tax if you do not pay the full amount during the tax payment.
• If you do not also pay at least 90% of the tax amount that you owe, then you have to be ready to pay the penalty. The penalty is calculated as half of the 1% owed for each of the months and up to a maximum of 25%.
• When taxpayers are not filing their return or their form 4868 by the deadline of the said tax year, they are subjected to tax fine payment. This penalty is also huge. Employees have to pay 5% of the fine on the amount they owe every month, up to a maximum of 25%.

But, after an extension is filed, taxpayers only have until October 15 to gather their documents and finish their tax filing. Also, when completing tax returns, taxpayers need to include the amount they have already paid in the payment section or in Form 1040.

Is It Possible To File Tax Extension Online?

Now that you know about the penalty and how tax extensions work, it is necessary to know different ways to file them – especially if you can file them online or not.

When you want to receive an automatic extension to filing tax returns, you need to first file Form 4868. It is totally possible to file your tax extensions. In fact, it is one of the many ways of filing tax return extensions. Also, you will not have to file form 4868 file all by yourself. The Tax extension information is sent online to the IRS.

Also, you will not have to fill out the 4868 form line by line, and the tax information will be sent to the IRS online.

How To File Tax Extensions For Free?

Individual taxpayers can file for their tax extensions for free regardless of their amount of income. They can generate electronic requests for automatic tax filing extensions. Also, you will have only until October 15 to file your tax return.

Also, the return filing date follows the same rule. If the date falls on a weekend or a legal holiday, you have until the next business day.

• If you want to get an extension, you need to estimate the tax liability on the said form and pay the amount due.
• It is also possible to get a tax extension by electronically paying a part of your tax or the complete payment and indicating that the tax payment is for an extension. Many online services are allowing direct pay for taxes.

Final Words

It is important to remember that when filing for a tax return extension, you must request it before the regular due date of the return. Also, if the taxpayers live in a certain disaster area, they do not need to file an submit an extension electronically or using papers. Also, paying tax before the due date is mandatory to avoid any penalty.

So, those were all the queries you needed answers to regarding tax extension. Please let us know if this article was helpful. Also, if you have any questions, please reach out through the comment box.

Continue Reading:

• Why Envelope Budgeting System is the Key to Financial Stability
• Which account does not appear on the balance sheet: A Overview
• Analyzing the statement of comprehensive income: Key metrics to look out for