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What to Expect When You Are Extending

By Peoples Tax | April 17, 2017
Posted in: Tax Tips

Caution, late filers! 

If you’re one of the 40 million taxpayers that have yet to file their taxes, or will file late, the good news is that you can file an extension, but the bad news is that extensions do not prevent you from having to pay steep late penalties and interest.

We strongly advise against getting an extension without paying estimated tax. The penalties and interest will add up quickly. Currently, the interest rate is 4% per year, compounded daily, and the late payment penalty is 0.5% per month.

The IRS allows you to submit an estimated tax payment when you file form 4868 (Application of Automatic Extension of Time to File U.S.) to get an extension. If mailed, the form must be postmarked on or before April 18. IRS Direct Pay allows taxpayers to submit estimated tax payments for free. Any payment made with an extension request will reduce or eliminate the interest and late payment penalties associated with payments made after April 18th.

We recommend that if you have to file an extension, to pay the estimated tax to avoid costly penalties and interest.

Need help with your tax situation, or would like a free check of your return?

Make an appointment online.

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