When Are Tax Extensions Due?

First thing’s first. An extension to file is NOT an extension to pay (unfortunately). This myth is one that I find surfacing for a number of clients who come to me after filing extensions on their own.

Another myth worth speaking to: tax deductions are NOT the same as tax credits. Donations are considered deductions, not credits (so they only reduce your tax bill by your effective tax rate, not by their full value)

Now that we’ve got those two common myths squared away, let’s talk about what to do if you filed an extension prior to the April tax deadline (or March deadline if you are an S-Corp, C-Corp, or Multi-member LLC).

When is the return due if I filed for an extension earlier this year?

If the original return was due April 15th, it now will be due October 15th. If the 15th falls on a (federal) holiday or weekend, it will be due the next business day. There is a 6-month grace period added to the original deadline. (Deadlines in March are extended until September)

Can I e-File an extension?

Yes, so long as you file before the deadline. The IRS generally closes the e-File system in November and December to prepare for the following tax year. During this time, returns may need to be filed by mail.

What happens if I owe more than my original extension payment?

The IRS adds penalties and interest to any late tax payments. The penalties are 0.5% per month the payment is late, with a maximum of 25%. States also add their own penalties and these vary from state to state (but generally don’t exceed a 25% penalty). California, for example, charges 5% per month with a cap of 25% (10x more than the IRS).

Interest for late payments to the IRS accrue at the current federal short-term interest rate, plus 3%. The typical short-term interest rate ranges from 0.5% to 1% (per year). Interest accrues daily.

Once you have paid the IRS your estimated payment (perhaps with penalties), it is best to check your IRS Online Account frequently to see if there are any additional fees. You will want to pay these as soon as you can. In addition, you can generally pay your state income taxes (and penalties) via your State Revenue Online portal. You may need to setup an account and possibly request a Letter ID if you don’t have a historical tax return on-hand (including your refund or payment amount from a previous year).

Can I setup a payment plan?

Both the IRS and State Departments of Revenue allow for payment plans (generally). Once you have e-filed the tax return (and it is processed), you can log into your Online Account (or Revenue Online Account) to see the balance due and possibly set-up a payment plan online. For some states (and sometimes for the IRS), it will require a phone call to set up. Note that it is much easier to get ahold of a State Department of Revenue than the IRS.

Have a question that isn’t addressed here? Leave a comment so I can add it to the post!