Is it worth getting a tax extension?

At the time of writing this, I (Garrett Mickley, Communications Director at AIBD) am procrastinating doing my taxes and am considering getting a tax extension.

I mean, I’m on the clock at the AIBD offices so I shouldn’t be doing my taxes at this moment anyway.

But, overall, I am procrastinating doing my taxes in my outside-of-work time.

The good news is, I have a super simple accounting method I use, so it won’t be really hard when I need to do it.

Even still, I find myself wondering…is it worth getting a tax extension anyway?

I decided to share my findings with you here.

The Penalty

If you end up owing the IRS money, you will face a penalty for filing late, and a penalty for paying late, even with the proper tax extension form.

The penalty is a 5% charge per month you are late paying. Luckily, this is capped at a maximum penalty of 25%.

That’s still a lot of money, and probably why I owed so much last year when I filed in October!

Aside from that late fee, you have to pay interest. Currently, the IRS interest rate for underpayments is 3% annually.

However, if you’re an employee of a company and you’ve been paying your taxes with every paycheck, you should be getting money back.

If that’s the case, they don’t want to give it to you, so of course there’s no late fees.

How to Apply for a Tax Extension:

Applying for an extension is pretty easy.

If you’re already using a service like HR Block or TurboTax, you can do it through their systems.

If you’re not you can download Form 4868, fill it out and send it in. All of the instructions are on the form.

Can your Extension be denied?

It can, but it’s highly unlikely.

As long as you fill out and file the form on time (on or before tax day, usually April 15th), you won’t be denied.

Keep copies of everything just in case the IRS says you were late and tries to give you trouble.

You can file late, but still have to pay on time.

Don’t forget, there are two penalty fees mentioned above.

One is for filing late, one is for paying late.

These are two separate fees and will still be incurred whether you file a tax extension or not.

On Form 4868 you will see that there is an option to pay some money now.

It’s a good idea to pay as much as you can towards your taxes (if you think you will owe).

Does filing a tax extension increase your chances of being audited?

There is no evidence that indicates you will be more likely to be audited if you file an extension, but my personal opinion is that you should do as little as possible to catch the IRS’ attention.

Filing an extension and paying as much as you can by April 15th will keep you lower on their radar for sure.

Most experts figure that if you’re making a clear effort then the IRS will hopefully leave you alone.

How long does a tax extension last for?

Usually, a tax extension lasts for six months after tax day.

Most years, that is October 15.

Can you file a second tax extension?

You can! But only if you apply to one (or more) of these circumstances:

Even those three situations have some stipulations so you may be denied even if you fit the very brief descriptions I wrote there. That’s why I included links to more information on each situation.

What if you can’t pay your taxes?

The IRS has a payment program you can sign up for.

If you’re using a service like HR Block or Turbo Tax, they should have that option when you file your taxes.

If you don’t use services like those, you’ll have to get your instructions from the IRS website.

Hope that helps!

Leave a Comment