The October 15th tax extension deadline is quickly approaching, which means it’s time to finish up that tax return you have been avoiding all summer. There are many benefits to filing an extension if your tax return is not quite ready in April, but there are no additional extensions available for the upcoming October 15th deadline. When you filed your extension in April, it did not extend the amount of time to pay, it just gave you an extra 6 months to finalize and file your tax return. You still had to pay the amount of tax you owed or the best estimate of it by April 15th. This might have people questioning why they need to get their returns in by October 15th if they already paid in April. The reason is to avoid possible penalties.
Depending on whether you owe money or are due a refund from the IRS will determine the consequences of not filing on time.
For individuals that will receive a refund, you will not be assessed any penalties. This is because the penalties are based on a percentage of the amount owed to the government. If you owe $0, any percentage of zero is still zero. However, the sooner you file, the sooner you’ll get your tax refund so it’s not a bad idea to get your tax return filed as soon as possible.
If you are one of the unlucky individuals that do owe, you could be subject to penalties. The IRS imposes two types of penalties; the failure-to-file penalty and the failure-to-pay penalty. The failure-to-file penalty is 5% per month on any unpaid taxes and the failure-to-pay penalty is .05% per month on any unpaid taxes. If you filed an extension in April the failure-to-file penalty is deferred until October 15th. However, if you do not file by October 15th the failure-to-file penalty begins that day and will be assessed until you file your return. If you did not file an extension in April, the failure-to-file penalty started April 15th and will continue until your return is filed and the amount you owe is paid. In general, the maximum penalty is 25% of the amount you owe. You will also have to pay interest on the amount of tax unpaid by April 15th.
In order to avoid these penalties be sure to file your tax return by April 15th or if you filed an extension, by October 15th, and pay the total amount you owe when you file your extension in April.