It's Tax Day, and some Americans may be scrambling to file their returns on April 18 after two years in which the IRS extended the tax filing deadline because of the pandemic.
Plenty of Americans leave their taxes until the last possible week. In a typical year, between 15 and 20 million people file their tax returns the last week before Tax Day, while another 20 million file after the due date.
The good news? For those who need more time, filing for an extension is quick and straightforward. And it will give you until October 17, 2022, to send your tax return to the IRS.
"People do have a tendency to wait until the last minute," noted Eric Bronnenkant, head of tax at Betterment. "You can get an extension for six months or so, but one of the most important things to know about filing for an extension is that it's not an extension to pay."
In other words, if you owe the IRS this year, you still have to pay Uncle Sam by April 18 even if you get an extension until October. Here's what to know about how to get an extension from the IRS.
What is this year's filing deadline?
Typically, the tax filing deadline is April 15, but this year taxpayers have until April 18 to file because the 15th falls on Emancipation Day, which is observed as a holiday in Washington, D.C. As a result, IRS offices were closed on April 15.
Residents of Maine and Massachusetts get one extra day to file — until April 19 — because of those states' recognition of Patriots Day on April 18.
Taxpayers who get an extension to file their taxes will have until October 17 to file their taxes. Typically, the extension gives people until October 15 to file their forms, but because that date falls on a Saturday, taxpayers have until the next business day, October 17, to file.
How do I get a tax extension?
First, you'll have to request an extension by April 18 or you could face a "failure to file" penalty, the IRS said. (See more on that penalty below.) The good news is that the extension is automatic, but you'll still need to take the first step of filing some paperwork with the IRS.
To ask for an extension, you'll need to fill out Form 4868. This is a one-page form that asks for basic information such as your name, address and Social Security number. It also asks you to estimate how much you owe in taxes.
This form can also be used through the IRS' Free File service, and can be used regardless of income. Typically, only people with adjusted gross income below $73,000 can use the Free File service, but anyone can use it to ask for an extension, the IRS said.
Can I get more time to file without asking for an extension?
In the U.S., victims of natural disasters typically get more time to file taxes automatically. This year, victims of the Decemberand flooding in Arkansas, Illinois, Kentucky and Tennessee, as well as victims of the December wildfires in Colorado, have until May 16, 2022, to file their 2021 returns and pay any tax due. Victims of severe storms, flooding and landslides in Puerto Rico that began on February have until June 15 to file and pay.
This extension is granted automatically to addresses within a federally declared disaster area— there's no need to get in touch with the IRS to ask for an extension.
Also, military service members or support personnel in combat zones have more time to file. They have at least 180 days, or about six months, after they leave the combat zone to file their tax returns and pay any tax due, the IRS notes. A list of designated combat zones is here.
U.S. citizens and resident aliens working abroad also have until June 15 to file their returns and pay taxes due, although any unpaid taxes will accrue interest at the rate of 4%, componded daily, after April 18.
What? I still need to pay the IRS?
That's right — getting an extension to file your tax return doesn't give you an extension on paying what you owe the government.
The IRS expects people to make an effort to pay what they owe, Betterment's Bronnenkant said. That may be difficult for people who haven't yet filled out their tax returns, but it's best to make a good-faith estimate.
"If your prior year is a good barometer for your current year, start with that as a way to come up with some sort of reasonable estimate," Bronnenkant said. "Don't let perfect be the enemy of good enough."
For instance, if you estimate that you owe $10,000 but end up actually owing $11,000, you'll be charged an underpayment penalty. But it will be less painful to face an underpayment penalty for $1,000 rather than the entire $11,000 that you owe, Bronnenkant noted.
What if the IRS owes me a refund?
If it turns out the IRS owes you money, you'll have to wait until after the IRS processes your tax return for the refund. So if you hold off until October 17 to file, you won't get the refund until about three weeks after that date based on the IRS' assessment that most taxpayers receive their refund within 21 days of filing.
This year's average refund is more than $3,200, according to the latest IRS data.
If you believe the IRS owes you money, you don't have to send in a check by April 18 to the IRS, of course. However, you should be confident that you are correct in your assessment, otherwise you'll face penalties for failing to pay your debt to the IRS.
What are the penalties for failing to file?
If you aren't going to get your tax return finished by April 18, it's best to file for an extension because the failure-to-file penalty is stiff. It is based on the lateness of a tax return as well as the size of unpaid taxes from the due date.
The penalty rate is 5% of unpaid taxes for each month that a filing is late, capped at 25%. Take a taxpayer who owes $10,000 but doesn't file for an extension — if they file two months late, they would $500 each month for a total of $1,000 in penalties.
The 5% penalty is the most stringent fee the IRS levies against late filers, Rebecca Walser of Walser Wealth Management told CBS News.
What are the penalties if I don't pay enough?
The failure-to-pay penalty is less punitive than the one for failing to file. The IRS charges 0.5% of the unpaid taxes for each month, with a cap of 25% of the unpaid taxes.
Take someone who pays an estimated tax of $10,000 by April 18, but it turns out they actually owe $11,000. They'll face a 0.5% charge on the extra $1,000 they owe the IRS. If they file in June — two months after the tax deadline — they would owe $10.
Do I have to file an extension with my state?
That depends. Once you've requested an extension from the feds, check if you'll need to do so for your state. According to the IRS, "State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline."
Some states will automatically give you an extension on your state taxes if you receive a federal extension. In other states, you'll need to request an extension separately. The Federation of Tax Administrators offers a rundown of how to check for tax information for the state you live in.
If you live in one of the nine states without personal income tax, you're likely in the clear. However, two of those states — New Hampshire and Tennessee — still tax investment income, so, if you have earnings from dividends, stock sales or other investments, you may still have to file a state tax return in those states.
for more features.