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If you need a tax extension, you’re not alone.
In 2022, the Internal Revenue Service (IRS) estimated about 19 million taxpayers filed a tax extension form because they needed extra time to prepare a tax return.
If you dread getting your act together before the tax filing deadline, getting an extension from the IRS is fairly easy. However, before you kick the can down the road on taxes owed to Uncle Sam, it’s critical you understand how tax extensions work and why delaying filing your return this tax season doesn’t defer your tax liability.
In other words, a tax extension gives you more time to file but not more time to pay.
What is a tax extension?
To avoid common misconceptions about taxes, you need to define what a tax extension is and what a tax extension isn’t. A tax extension is a request you file via an IRS form that extends the filing deadline for your tax return. Note that this extension applies to your tax paperwork, not your tax payment.
Put another way: Although a tax extension extends the due date for filing tax returns, it does not extend the tax deadline if you owe money to the IRS. While filing the appropriate tax forms for an extension means you’ll avoid a failure-to-file penalty, you’ll still incur a late payment penalty if you don’t pay your estimated tax bill by tax day.
Read more: Free tax filing: 7 ways to get your 2023 taxes done
How does a federal tax return extension work?
A federal tax return extension provides more time to file your tax return in a given tax year, usually six months. You can only file for one extension per tax return, so make the extra time count. However, if you don’t owe money to the IRS, you’re not required to file a tax return or request an extension.
But you should double-check because if you owe money, you’ll need to submit an estimated income tax payment along with your extension request. This is why tax extensions can help if you’re still gathering documents to file your taxes, but they are not a get-out-of-paying-taxes-until-later card.
Keep in mind that filing for a federal extension on the IRS website also doesn’t provide an automatic extension on your state taxes. In some cases, you’ll need to file paperwork for a separate extension, typically a state tax extension, to avoid additional penalties for failing to file your state taxes by the deadline.
What is the 2023 federal tax extension deadline?
The deadline to file taxes for the 2023 tax year is April 15, 2024. If you need more time to prepare your tax return, the deadline to file a request for a federal tax extension is the same as the federal filing deadline (April 15, 2024). Once you’ve filed for an extension, the federal tax extension deadline is extended six months to Oct. 15, 2024.
Certain taxpayers automatically get additional time to file a tax return without a late-filing penalty, including U.S. citizens living and working abroad, some military members and their families, and people affected by FEMA-declared natural disasters.
Read more: What to expect for the 2024 tax filing season
How to file an IRS tax extension: A step-by-step guide
Need a little extra time to get your tax documents in order? Follow these steps by April 15, 2024, to ensure you don’t miss the deadline for filing an extension on your 2023 federal taxes.
Step 1: Determine if you owe money or you’re owed a tax refund
You don’t need to know your total taxes down to the last dime, but you should calculate your adjusted gross income (AGI) and compare it to the taxes you’ve paid during the year to see if you’re likely to be issued a refund or owe money to the IRS.
The IRS has instructions about how to calculate your AGI, but you can also consult a tax pro or use tax software to double-check your numbers. Don’t forget to apply available tax deductions that could significantly reduce your taxable income and tax credits like the child tax credit and dependent care credit that reduce your tax bill dollar for dollar.
If you’re owed a tax refund from the IRS, you don’t need to file a federal tax extension. But do file a return soon so you can enjoy the spoils of your refund check rather than letting the IRS make bank sitting on your funds.
Think you’ll need to pay the piper this tax season? Proceed to the next step if you have tax due.
Read more: Tax credit vs. tax deduction: What’s the difference and which is better?
Step 2: File an extension on your federal taxes
There are a few ways to file an extension on your federal taxes. You can electronically request an extension online with IRS form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return), or you can fill out and mail the paper form.
The form is available on the IRS website or through the IRS Free File, an e-file tax software for taxpayers with an adjusted gross income of $79,000 or less. You can also consult with a tax professional or use tax software to get access to tax extension information and forms.
While federal tax extensions are almost always granted, you should check back to verify the status of your request. If you need to correct your request because of misspellings or other mistakes, the IRS usually provides several business days to do so.
Step 3: File a state extension if needed
Chances are if you owe federal taxes, you might also owe taxes to the state where you reside or work. This can be a significant concern for those who are self-employed contractors or sole proprietors of business entities that aren’t required to pay quarterly estimated state taxes.
Like a federal tax filing extension, a state extension will give you more time to prepare your tax return, but doesn’t extend the deadline for paying your taxes.
Step 4: Figure out a payment plan
To avoid being charged interest or late payment penalties, you should pay as much of your tax bill as you can by the deadline. But if you’re worried you can’t cover your unpaid taxes, don’t panic — you’ve got options.
If your unpaid balance with the IRS is $50,000 or less, you can request to make payments in monthly installments with either a short-term or a long-term repayment plan. Most states also offer similar payment options to struggling taxpayers.
Read more: Can you pay taxes with a credit card, and how much will it cost?
Tax extension frequently asked questions (FAQs)
1. Is there a penalty for filing an income tax extension?
There’s no penalty for requesting an extension on filing your federal income tax return. In fact you’ll avoid a failure-to-file penalty if you submit an extension request by the tax deadline.
However, there is a failure-to-pay penalty if you don’t pay your taxes on time. The IRS penalty can be anywhere from .5% of the amount you owe each month up to a maximum of 25% of your total unpaid balance.
2. Can you file a tax extension request online?
Yes, you can submit a federal tax extension request online, either through IRS Free File, free e-file form or fillable versions of Form 4868, or if you’re paying electronically on the IRS website. There are also ways to file for a federal tax extension through free or paid versions of tax software or with tax preparation assistance from a tax professional.
3. Does a tax extension give me more time to pay my tax bill?
The bottom line is getting a federal tax extension gives you more time to gather your tax documents and file your tax return. But no matter your tax situation, an extension does not give you more time to pay your taxes.
However, if you can’t afford to pay the full balance of what you owe the IRS now, you can leverage both long-term and short-term payment plans to break your tax bill into more manageable monthly installments and avoid penalties.