You're just not ready to file that tax return, and the tax deadline is creeping closer. No worries. Getting an extension is easy. No matter how you file, here is a guide to next steps.
UPDATE: The Treasury recently announced tax changes and updates in response to COVID-19, updates include an extension of the first installment of tax year 2020 quarterly estimated taxes to July 15, 2020. Some information in this post however requires additional IRS guidance and may require updating. We will update as soon as we receive additional guidance. Please see the latest information on tax deadlines and updates related to COVID-19 here.
Checking federal tax extension status
If you sent your extension in on time, it should be granted. To confirm receipt, it's easiest if you use software like TurboTax Easy Extension, since you'll get a confirmation from TurboTax within 48 hours.
If you use the U.S. mail to send your extension, you'll have to contact the Internal Revenue Service (IRS) to ask about extension status. Currently, you can't do this on the IRS website. Call the IRS customer service number to determine if your request for an extension was received and approved.
Checking state tax extension status
If your state requires that you file an extension application separate from the federal tax extension application, you'll have to contact the taxing authorities in your state to check on its status. Call the taxpayer service number and ask the service agent whether your papers arrived on time.
Paying any tax due
The standard tax extension allows you to file your tax return after the usual deadline. However, it doesn't buy you more time to pay any taxes you may owe. That means that if you don’t pay your tax balance by the filing deadline (July 15 in 2020), you'll get hit with penalty and interest.
Even if you can’t pay it all immediately, pay as much as you can. Penalty and interest are based on the amount you owe and how long you owe it. Late payment penalties are calculated at 0.5% of the unpaid tax balance per month. The maximum you can be charged in late payment penalties is 25% of the unpaid tax.
For example, if your tax balance is $2,000:
- Penalty per month = $2,000 x 0.5% = $10
- Total possible late payment penalty = $2,000 x 25% = $500
If you know you’re going to be out of the country on tax day, there is a two-month extension that allows you to hold off paying taxes without penalty, but you will still be assessed interest as of the day after the tax filing deadline.
Interest on unpaid tax compounds daily from the original due date of the return until the date you pay in full. The rate is calculated as the federal short-term interest rate, currently .81% plus 3%. Interest is applied daily, so for each day you're late, you’ll owe 0.0082% of the balance.
For example, if you owe $2,000 in taxes and don’t pay by the due date, you’ll pay:
- .81% + 3% = 3.81% annual interest
- 3.81% annual interest divided by 365 days = .01%
- Penalty per day: $2,000 x 0.01% = $0.20
Note that compounding interest results in a daily recalculation of the principal amount plus accrued interest.
Filing tax returns on time
Generally, the due date for filing your income taxes is April 15. However, in some years it can fall on a weekend or a holiday. Therefore, the tax deadline can change to April 16, 17, or even 18 depending on the situation. However, take note that the tax deadline is July 15 in 2020.
That means that if you are granted a two-month extension because you are out of the country on tax day, you have until June 15 (if the tax deadline is April 15) to file your return and pay your tax.
If you are granted an extension, you have until October 15 based on the general April 15th tax deadline. These extensions automatically extend your state income tax deadline as well in some states, like California. Other states, like New York, require a separate extension request.
When tax extensions are rejected
Even when filed before the deadline, some tax extension requests are rejected on or after that date. You will get notified in an email or a letter from the IRS if your extension request is denied. While the reasons behind this vary, the most common ones are:
- Misspellings, switched numbers and other errors on the extension form
- Out-of-date information like old addresses or last names that don't match up to the IRS records
In these cases, the IRS provides a window of time—typically five days—in which you may fix issues and correct errors with your request in order to file again.
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