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Payments and Penalties Related to Tax Filing Extensions

A tax filing extension can be a life saver, but it’s important to understand what a filing extension does and doesn’t do. Some taxpayers get into trouble because they request filing extensions as a means of delaying payment of their tax bill, which can lead to penalties and other problems.

Effect of a Tax Filing Extension

A tax filing extension gives you six more months to file your tax return. This impacts how much you may be charged for two different penalties—the late payment penalty and the late filing penalty.

You won’t be charged the late filing penalty if you request an extension and file by the extended due date. This penalty is much bigger than the late payment penalty, which is why it’s a good idea to request a filing extension in the first place.

You can still be charged the late payment penalty, even if you receive a filing extension. This penalty generally equals 0.5% of the tax due per month. 

However, you can avoid this penalty if you submit at least 90% of your tax due for the year by the regular due date, which is usually around April 15. If you haven’t paid this amount throughout the year in withholding or estimated tax payments, you can submit an additional payment with your filing extension request. You need to pay the remaining balance by the extended due date to avoid penalties.

Other Options If You Can’t Pay Your Tax Bill

If you can’t pay your full tax liability when you file, requesting a filing extension isn’t your only option. You can still file your return on time and pay as much as you can with your return. If you submit the remaining amount within the next few months, you’ll generally avoid enforced collections from the IRS, such as bank account levies.

You can pay off your remaining balance in an installment agreement. However, you may want to consult a tax attorney to make sure your payment plan will fit your budget. You also need to understand what’s required of you to avoid defaulting on your installment agreement.

Get help with IRS installment agreements by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.