Behind on filing your tax return? Make this key move
If you don't think you'll be able to get your tax return in by April 18, which is this year's filing deadline, then it's important that you ask the IRS for an extension by or before that deadline
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Many of us pledge to tackle our taxes early every year, only to land in a scenario where instead, we're running up against the deadline and aren't ready with our returns. If that's what's happening to you right now, you're no doubt in good company. But you also don't want to be late with your return.
Now to be fair, if you're owed money by the IRS, there's no penalty for being late with your taxes. In that case, being late will delay your refund, but that's your loss, not the IRS's, so the agency won't penalize you for missing the deadline.
It's when you owe the IRS money that filing a tax return late becomes a big problem. And if that's the situation you think you're looking at, there's one key move you'll need to make sooner rather than later.
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Ask for more time
If you don't think you'll be able to get your tax return in by April 18, which is this year's filing deadline, then it's important that you ask the IRS for an extension by or before that deadline. To do so, you'll need to file Form 4868, which you can do electronically.
Once you submit that form, you automatically get an extra six months to complete your tax return. You don't need to sit back and wait for the IRS to approve your request.
In fact, you don't even need a specific reason to be asking the IRS for more time. And you'll notice that Form 4868 won't ask you for one.
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A man enters the Internal Revenue Service (IRS) building in Washington, D.C., U.S., on Friday, May 7, 2010. (Andrew Harrer/Bloomberg via Getty Images / Getty Images)
When being late with your taxes can hurt you
If you owe the IRS money from 2021 and don't submit your tax return by April 18, you'll be assessed a costly penalty for failing to file on time. That penalty will be worth 5% of your tax bill per month or partial month your return is late (up to 25% in total).
So, let's say you owe the IRS $3,000 from 2021. If you're a month late with your tax return, it'll cost you $150 without an extension in place. Ouch.
To be clear, if you don't pay your tax bill by April 18, you'll still incur interest and penalties on the sum you owe. A tax extension will not give you more time to pay the IRS -- it will only give you more time to get your return completed. The benefit of that extension, however, is avoiding the 5% penalty that kicks in when you're late with a return and owe money.
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For context, when you owe the IRS money on a tax bill that isn't paid by the filing deadline but you're timely with your return or get an extension, you incur a penalty equal to 0.5% of your unpaid total per month or partial month you're late (up to 25% in total). On a monthly basis, that's one-tenth the penalty of being late with a return.
Obviously, it's best to avoid all penalties if possible. But the one you really want to avoid is the failure-to-file penalty, since it could cost you the most money.
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Plan ahead for next year
There's no need to beat yourself up for falling behind on your tax return preparation. At the same time, use this as a lesson to get ahead of the game next year. It's generally a good idea to try to get your taxes done on time -- because even if you don't owe any money, having to wait longer for your tax refund to hit your bank account only hurts you.