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Tax Filing Extensions vs. Tax Payment Extensions

Tax Filing Extensions vs. Tax Payment Extensions

The IRS offers both tax filing extensions and tax payment extensions. Each program has its own conditions and benefits.

Automatic vs. Conditional

The filing extension is automatic for taxpayers that request it. There are no conditions to meet—just send in the filing extension request form and you’ll receive a six-month extension on your tax return due date.

Tax payment extensions are only granted in cases of severe hardship. You must provide proof that paying your taxes on time will cause an undue hardship.

An undue hardship could mean being forced to sell an asset at below market price or some other type of financial loss. A mere inconvenience will not qualify as an undue hardship.

Penalty Avoidance

A filing extension will allow you to avoid the failure-to-file penalty for up to six months. However, you could still face late payment penalties if you will owe taxes on your return. If you are due a refund, you won’t face any penalties.

A payment extension allows you to avoid the failure-to-pay penalty. Typically, payment extensions are granted for up to six months. You must submit your payment extension request before the return due date for an upcoming return.

Best Practices

If you request a filing extension and you owe taxes, it’s a good idea to send an initial deposit with your extension request form. If you have paid at least 90% of your taxes for the year by the return due date, you can avoid underpayment penalties. Make sure you file your return and pay your full balance by the extended deadline, which is usually around October 15th.

Taxpayers who request payment extensions should have a plan in place to pay off their tax bill. Once your extension period ends, you’ll be charged late payment penalties until you pay your full balance. 

The IRS could also begin taking enforced collection actions, such as levying your bank account or garnishing a portion of your wages. You could avoid these problems by negotiating an installment agreement or another tax resolution plan.

Talk to a tax resolution attorney to protect your assets and develop a plan to get out of IRS tax debt.

Contact The Gartzman Law Firm to speak with an Atlanta tax attorney about your case. Request your consultation by calling (770) 939-7710.